Stern Groep NV (AMS:STRN), which is in the specialty retail business, and is based in Netherlands, maintained its current share price over the past couple of month on the ENXTAM, with a relatively tight range of €15.7 to €17.2. However, does this price actually reflect the true value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Stern Groep’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 Stern Groep
What’s the opportunity in Stern Groep?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 13.7x is currently trading slightly above its industry peers’ ratio of 12.1x, which means if you buy Stern Groep today, you’d be paying a relatively fair price for it. And if you believe that Stern Groep should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. In addition to this, it seems like Stern Groep’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Stern Groep?
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. Stern Groep’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? STRN’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 STRN? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on STRN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for STRN, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.