Today we’re going to take a look at the well-established United Internet AG (DB:UTDI). The company’s stock received a lot of attention from a substantial price movement on the DB in the over the last few months, increasing to €59.26 at one point, and dropping to the lows of €51.96. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether United Internet’s current trading price of €57.12 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at United Internet’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for United Internet
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What’s the opportunity in United Internet?
United Internet appears to be overvalued by 49% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €57.12 on the market compared to my intrinsic value of €38.24. This means that the opportunity to buy United Internet at a good price has disappeared! Furthermore, United Internet’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What does the future of United Internet 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. 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. However, with a negative profit growth of -7.83% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for United Internet. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe UTDI is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on UTDI for a while, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on United Internet. You can find everything you need to know about United Internet in the latest infographic research report. If you are no longer interested in United Internet, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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