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Siemens Aktiengesellschaft (ETR:SIE) saw a decent share price growth of 18% on the XTRA over the last few months. The company's trading levels have approached the yearly peak, following the recent bounce in the share price. 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, what if the stock is still a bargain? Let’s examine Siemens’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Siemens
What's The Opportunity In Siemens?
The share price seems sensible at the moment 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 17.71x is currently trading slightly above its industry peers’ ratio of 16.58x, which means if you buy Siemens today, you’d be paying a relatively reasonable price for it. And if you believe Siemens should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Siemens’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Siemens look like?
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. With profit expected to grow by a double-digit 19% over the next couple of years, the outlook is positive for Siemens. 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? SIE’s optimistic future growth appears to have been factored into the current share price, 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 SIE? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?