Carl Zeiss Meditec AG (ETR:AFX), is not the largest company out there, but it led the XTRA gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Carl Zeiss Meditec’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Carl Zeiss Meditec

What's The Opportunity In Carl Zeiss Meditec?

Carl Zeiss Meditec appears to be overvalued by 25% at the moment, based on our discounted cash flow valuation. The stock is currently priced at €70.85 on the market compared to our intrinsic value of €56.78. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that Carl Zeiss Meditec’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Carl Zeiss Meditec?

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. With profit expected to grow by 57% over the next couple of years, the future seems bright for Carl Zeiss Meditec. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in AFX’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe AFX should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. 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 tabs on AFX for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for AFX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.