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While Krones AG (ETR:KRN) might not have the largest market cap around , it saw significant share price movement during recent months on the XTRA, rising to highs of €130 and falling to the lows of €113. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Krones' current trading price of €122 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Krones’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 Krones
Is Krones Still Cheap?
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. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Krones’s ratio of 15.4x is trading slightly below its industry peers’ ratio of 16.01x, which means if you buy Krones today, you’d be paying a reasonable price for it. And if you believe that Krones 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. Although, there may be an opportunity to buy in the future. This is because Krones’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.
Can we expect growth from Krones?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Krones' earnings over the next few years are expected to increase by 63%, 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? KRN’s optimistic future growth appears to have been factored into the current share price, 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 KRN? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?