Let's talk about the popular Mercedes-Benz Group AG (ETR:MBG). The company's shares received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €75.77 at one point, and dropping to the lows of €65.06. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Mercedes-Benz Group's current trading price of €67.86 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Mercedes-Benz Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Mercedes-Benz Group

What's The Opportunity In Mercedes-Benz Group?

According to my valuation model, Mercedes-Benz Group seems to be fairly priced at around 4.95% above my intrinsic value, which means if you buy Mercedes-Benz Group today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is €64.66, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Mercedes-Benz Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Mercedes-Benz Group?

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Mercedes-Benz Group, it is expected to deliver a negative earnings growth of -11%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? MBG seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on MBG for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on MBG should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Mercedes-Benz Group at this point in time. Every company has risks, and we've spotted 3 warning signs for Mercedes-Benz Group (of which 2 shouldn't be ignored!) you should know about.

If you are no longer interested in Mercedes-Benz Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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