UBM Development AG (VIE:UBS), is not the largest company out there, but it led the WBAG gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine UBM Development’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What’s the opportunity in UBM Development?
Great news for investors – UBM Development is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is €55.43, but it is currently trading at €40.20 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because UBM Development’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.
Can we expect growth from UBM Development?
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. 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. Though in the case of UBM Development, it is expected to deliver a negative earnings growth of -6.3%, 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 UBS is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to UBS, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on UBS for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Keep in mind, when it comes to analysing a stock it’s worth noting the risks involved. When we did our research, we found 2 warning signs for UBM Development (1 is a bit unpleasant!) that we believe deserve your full attention.
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