Is It Time To Reconsider eToro Group (ETOR) After Recent Share Price Rebound?
- Wondering whether eToro Group's share price still reflects its true worth, or if the recent moves have pushed it away from fair value.
- Over the short term, the stock has seen an 18.2% return over 7 days and 1.6% over 30 days, while the year to date return sits at a 10.8% decline from the last close of US$31.84.
- This price action is occurring against a backdrop of ongoing attention on online trading platforms and broader interest in listed fintech businesses, which keeps sentiment in play even without headline grabbing company specific news. For investors, that makes it especially important to separate short term attention from what the fundamentals may actually justify.
- On our checks, eToro Group records a valuation score of 5 out of 6, which sets up a closer look at how different valuation methods treat the stock and, later in the article, an approach that can help you put those valuation results into a fuller context.
Approach 1: eToro Group Excess Returns Analysis
The Excess Returns model looks at how much profit a company is estimated to earn above the return required by its shareholders, then converts that stream of extra profit into a per share value today.
For eToro Group, the starting point is a Book Value of US$16.08 per share and an estimated Stable EPS of US$3.36 per share, based on the median return on equity from the past 5 years. The model applies a Cost of Equity of US$1.55 per share, which implies an Excess Return of US$1.81 per share after covering that required return. The Average Return on Equity used in the calculations is 21.04%, with a Stable Book Value input of US$15.99 per share, based on the median book value over the past 5 years.
Using these assumptions, the Excess Returns model indicates an intrinsic value that is 28.8% above the recent share price of US$31.84. On this basis, the stock screens as undervalued according to the model.
Result: UNDERVALUED
Our Excess Returns analysis suggests eToro Group is undervalued by 28.8%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.
Approach 2: eToro Group Price vs Earnings
For a profitable business like eToro Group, the P/E ratio is a useful shorthand because it links what you pay directly to the earnings the company is already producing. It helps you see how much the market is willing to pay for each dollar of profit.
What counts as a “normal” P/E depends a lot on what investors expect for growth and how much risk they see. Higher expected growth or lower perceived risk can support a higher P/E, while lower growth or higher risk usually points to a lower P/E.
eToro Group currently trades on a P/E of 12.36x. That sits below the Capital Markets industry average P/E of 23.23x and the peer average of 20.27x. Simply Wall St’s Fair Ratio for eToro Group is 18.59x. This Fair Ratio is a proprietary estimate of what a reasonable P/E might be for the company, based on factors such as its earnings growth profile, industry, profit margins, market cap and company specific risks.
Because the Fair Ratio adjusts for these company specific traits, it can be more informative than a simple comparison with peers or the broad industry. With the current 12.36x P/E sitting below the 18.59x Fair Ratio, the multiple based view points to the shares looking undervalued on earnings.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your eToro Group Narrative
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which Simply Wall St makes available on the Community page to help you connect the story you believe about eToro Group with a clear set of assumptions for future revenue, earnings, margins and a resulting fair value. You can compare this directly to the current price when deciding whether to buy or sell. It then updates automatically as new news or earnings arrive. Different investors can hold very different Narratives on eToro Group, from cautious views with lower fair values to more optimistic cases with higher fair values, all grounded in their own forecasts.
Do you think there's more to the story for eToro Group? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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