Vossloh (XTRA:VOS) is back in focus after securing a new framework contract with Sweden’s Trafikverket for pre assembled turnouts, valued at about €70 million, alongside its latest quarterly earnings release.
See our latest analysis for Vossloh.
Despite the new Trafikverket contract and recently reported higher sales, Vossloh’s share price has been under pressure, with the 90 day share price return down 18.82% and the 1 year total shareholder return down 31.86%. However, the 3 and 5 year total shareholder returns of 53.89% and 53.14% present a stronger longer term picture.
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After the sell off and with Vossloh posting higher sales but lower earnings, the question now is whether recent weakness has already priced in the bad news or if most of the recovery is already reflected in the stock.
Preferred P/E of 32x: Is it justified for Vossloh?
On Simply Wall St’s checks, Vossloh currently trades on a P/E of 32x, which screens as good value versus a peer group average of 39.1x, yet screens as expensive versus both the German Machinery industry average of 18.2x and an estimated fair P/E of 29.4x.
The P/E ratio links the €59.10 share price to the earnings that Vossloh generates. It reflects what investors are willing to pay for each euro of current profit. For a rail infrastructure supplier with forecast earnings growth and a long operating history, valuation often hinges on what investors expect profits to look like a few years from now rather than just the latest quarter.
Compared with the Machinery industry, Vossloh trades on a much higher multiple, which suggests the market is currently paying a clear premium to the sector for its earnings. At the same time, the estimated fair P/E of 29.4x sits below the present 32x level. This points to some room for that premium to narrow if sentiment or expectations soften over time and the multiple gravitates closer to the fair ratio level.
Explore the SWS fair ratio for Vossloh
Result: Price-to-earnings of 32x (OVERVALUED)
However, investors still need to weigh risks such as pressure on profitability at a €35.7m net income level, as well as any setback in large contracts like Trafikverket.
Find out about the key risks to this Vossloh narrative.
Another view on Vossloh’s valuation
The P/E discussion suggests Vossloh looks expensive relative to the German Machinery industry, even if it sits below a peer average. Our DCF model points in the opposite direction and indicates the stock trades below an estimate of future cash flow value at €111.63 per share.
This gap between a rich earnings multiple and an apparent discount on cash flows raises a practical question for you: which signal deserves more weight, the earnings based premium or the implied upside from future cash flows?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Vossloh for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 250 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Uncertain about whether recent moves around Vossloh reflect too much caution or too much optimism? Act quickly, review the full picture, and weigh both sides of the story with 3 key rewards and 3 important warning signs.
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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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