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Nagarro SE (ETR:NA9), might not be a large cap stock, but it saw significant share price movement during recent months on the XTRA, rising to highs of €93.60 and falling to the lows of €75.30. 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 Nagarro's current trading price of €76.50 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Nagarro’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Nagarro
What's The Opportunity In Nagarro?
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 Nagarro’s ratio of 18.76x is trading slightly below its industry peers’ ratio of 18.89x, which means if you buy Nagarro today, you’d be paying a reasonable price for it. And if you believe that Nagarro 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. Is there another opportunity to buy low in the future? Since Nagarro’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Nagarro look like?
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. 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. Nagarro's earnings over the next few years are expected to increase by 76%, 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? NA9’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 NA9? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?