Gigaset AG (ETR:GGS), which is in the communications business, and is based in Germany, saw a decent share price growth in the teens level on the XTRA over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Gigaset’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Gigaset
What's the opportunity in Gigaset?
Great news for investors – Gigaset is still trading at a fairly cheap price. I’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 13.18x is currently well-below the industry average of 19.51x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Gigaset’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, 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 Gigaset generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. In the upcoming year, Gigaset’s earnings are expected to increase by 39%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since GGS is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on GGS for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GGS. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.