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Today we're going to take a look at the well-established Brenntag SE (ETR:BNR). The company's stock had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of €62.96 to €67.34. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Brenntag’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Brenntag
What Is Brenntag Worth?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 15.4x is currently trading slightly below its industry peers’ ratio of 15.4x, which means if you buy Brenntag today, you’d be paying a decent price for it. And if you believe that Brenntag should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, Brenntag’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of Brenntag look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Brenntag's earnings over the next few years are expected to increase by 48%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in BNR’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at BNR? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on BNR, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for BNR, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.