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Bastei Lübbe AG (ETR:BST), might not be a large cap stock, but it saw a decent share price growth of 16% on the XTRA over the last few months. The company is inching closer to its yearly highs following the recent share price climb. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Bastei Lübbe’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Bastei Lübbe
What Is Bastei Lübbe Worth?
Great news for investors – Bastei Lübbe is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 Bastei Lübbe’s ratio of 12.09x is below its peer average of 23.14x, which indicates the stock is trading at a lower price compared to the Media industry. What’s more interesting is that, Bastei Lübbe’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Bastei Lübbe generate?
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. However, with a negative profit growth of -2.3% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Bastei Lübbe. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although BST is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. We recommend you think about whether you want to increase your portfolio exposure to BST, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on BST for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.