GN Growing AG (GG) is currently selling for €240, with TTM EPS and dividends per share of €1.5 and €0.9, respectively. The company’s trailing P/E is 16.0, P/B is 3.2. P/Sales based on forecast sales, is 1.5. ROE is 20%, and for the profit margin on sales is 10.0%. The Treasury bond rate is 4.9%, the equity risk premium is 5.5%, and GG’s beta is 1.2.
Q. Given that the assumptions and constant growth model are appropriate, state and justify whether GG, based on fundamentals, appears to be fairly valued, overvalued, or undervalued.
The justified trailing P/E is higher than the trailing P/E (18.5 versus 16), the justified trailing P/B is higher than the actual trailing P/B (3.4 versus 3.2). The justified P/S based on forward looking margin assumptions is higher than the actual P/S based of forecast sales (1.7 versus 1.5). Therefore, based on these three measures, GG appears to be slightly undervalued.
HOW CAN I GET IF THE COMPANY ARE UNDERVALUED BY COMPARING THE PRICE MULTIPLES