Let's talk about the popular Mercedes-Benz Group AG (ETR:MBG). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the XTRA. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Mercedes-Benz Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Mercedes-Benz Group
Is Mercedes-Benz Group Still Cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 8.9% below my intrinsic value, which means if you buy Mercedes-Benz Group today, you’d be paying a fair price for it. And if you believe that the stock is really worth €68.18, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Mercedes-Benz Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Mercedes-Benz Group 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. However, with a negative profit growth of -4.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Mercedes-Benz Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, MBG appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on MBG for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on MBG should the price fluctuate below its true value.