Should You Think About Buying Deutsche Lufthansa AG (ETR:LHA) Now?
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Deutsche Lufthansa AG (ETR:LHA), is not the largest company out there, but it saw a decent share price growth of 13% on the XTRA over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the mid-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 examine Deutsche Lufthansa’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Deutsche Lufthansa
What Is Deutsche Lufthansa Worth?
Great news for investors – Deutsche Lufthansa 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 Deutsche Lufthansa’s ratio of 4.61x is below its peer average of 6.5x, which indicates the stock is trading at a lower price compared to the Airlines industry. Although, there may be another chance to buy again in the future. This is because Deutsche Lufthansa’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 Deutsche Lufthansa 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 relatively muted profit growth of 8.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Deutsche Lufthansa, at least in the short term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since LHA is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
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Are you a potential investor? If you’ve been keeping an eye on LHA for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LHA. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.