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