In This Article:
Fabasoft AG (ETR:FAA), might not be a large cap stock, but it saw significant share price movement during recent months on the XTRA, rising to highs of €19.20 and falling to the lows of €15.35. 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 Fabasoft's current trading price of €15.35 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 Fabasoft’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Our free stock report includes 2 warning signs investors should be aware of before investing in Fabasoft. Read for free now.
Is Fabasoft Still Cheap?
Great news for investors – Fabasoft 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. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.36x is currently well-below the industry average of 26.34x, meaning that it is trading at a cheaper price relative to its peers. However, given that Fabasoft’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
See our latest analysis for Fabasoft
Can we expect growth from Fabasoft?
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. Though in the case of Fabasoft, it is expected to deliver a negative earnings growth of -6.1%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Although FAA is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. We recommend you think about whether you want to increase your portfolio exposure to FAA, or whether diversifying into another stock may be a better move for your total risk and return.