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Today we're going to take a look at the well-established Fresenius Medical Care AG & Co. KGaA (ETR:FME). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the XTRA. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Fresenius Medical Care KGaA’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Fresenius Medical Care KGaA
Is Fresenius Medical Care KGaA Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Fresenius Medical Care KGaA’s ratio of 19.6x is trading in-line with its industry peers’ ratio, which means if you buy Fresenius Medical Care KGaA today, you’d be paying a relatively sensible price for it. Furthermore, it seems like Fresenius Medical Care KGaA’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Fresenius Medical Care KGaA 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. With profit expected to grow by 82% over the next couple of years, the future seems bright for Fresenius Medical Care KGaA. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in FME’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at FME? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?