Bayer (WKN: BAY001 ISIN: DE000BAY0017 Sector: Pharma Country: Germany) Stock analysis.
Bayer AG is one of the world's largest companies in the pharmaceutical and agricultural sectors. The industry comparison with other stocks from the pharmaceutical industry shows in the sector analysis whether the company is cheap or expensive compared to the peer group:
Price-to-book-ratio (P/B): 0,96
Price-to-earnings-ratio (P/E): 11,2
Price-to-book-ratio (P/B): 6,68
Price-to-earnings-ratio (P/E): 50,26
The industry comparison shows that other pharmaceutical stocks are currently much more expensive than Bayer stocks. At first glance, Bayer shares could be a real bargain. Since the P/B ratio and P/E ratio only indicate whether a share is cheap or expensive and not why, further information needs to be analyzed. So the question arises whether the market is wrong and Bayer is an absolute bargain, or whether Bayer has serious problems and therefore even such an apparently favorable valuation is still too high. It should be mentioned that the entire pharmaceutical industry is hyped due to the corona pandemic. Other industry representatives showed a better share development than Bayer AG. This can also be seen in the relative strengths comparison.
By calculating the fair price (fair value) of the share, it can be determined whether the share is currently cheap or expensive. We use several different approaches to calculate fair value. Overview of fair value analyzes on Bayer shares:
2020: 92 EUR
2021e: 101 EUR
2020: 37.45 EUR
2021e: 40.5 EUR
The fair value of Bayer shares is around EUR 56. This makes the stock seem only slightly undervalued and interesting for a buy. (Arithmetic mean from geometric mean 59.5 EUR and the median 53.42 = 56 EUR) Current price: 47 EUR.
The Fair Value Calculator Quality Check analyzes the soft quality factors of Bayer shares. This includes the analysis of the management, the product and the market environment. The Total Value Score Ranking can be used to check the financial key figures for Bayer shares:
If the stock is trading below a P / E of 9, the stock looks cheap. With a total value score of 3 out of 10 points, Bayer AG shares appear to have a below-average financial position.
The company's relative strength is one of the most important alpha factors in stock research. Only stocks with high relative strength and momentum can beat the market. The relative strength describes the factor with which the share performs in comparison to the overall market. (If the share performance corresponds to the market performance, the relative strength would be 1)
Pharma Branche: 0.5
Pharma Industry: 0.72
Bayer AG shares have clearly shown weakness in recent months. Although the relative strength has increased in the last 6 months, this performance is still clearly subject to the overall market. This is evidence of low momentum that is very likely to remain inferior to the market in the future.
The growth figures and the price-earnings-growth-ratio indicate whether the P/E ratio is justified due to strong growth. A comparison of the growth to the peer group rounds off the multiples comparison.
In relation to its growth, Bayer AG shares are still too expensive. With a PEG ratio of 5.1, the stock appears to be way too expensive. Bayer AG hardly manages to grow in this industry. The industry appears overvalued and the stock itself is still too expensive. While the entire industry can grow by almost 6%, Bayer can only grow 2.2%.
At first glance, Bayer AG shares appear to be a bargain. A P/E ratio of less than 1 and a P E ratio of 11 actually indicate a cheap company. However, on closer inspection, it quickly becomes clear that Bayer AG is anything but a bargain. In an industry that is already too expensive, Bayer shares are of poor quality. Exactly the opposite of what we are looking for using the Fair Value Calculator method. The fair value of 53 euros is quoted almost at the current price of 47 euros, leaving no room for positive price surprises. The fair P / E ratio for Bayer would be 9, but is still listed at 11. As soon as the corona crisis is over and the pharmaceutical industry is valued normally again, the share price could continue to suffer and cheaper entry opportunities are likely. You should only buy this stock with a P/E ratio of less than 9. Bayer’s financial metrics do not suggest that the stock will beat the market. Since the share price has developed significantly worse than the overall market, it is also likely that Bayer shares will hardly start a fireworks display. Combined with the poor growth figures, we would keep our hands off Bayer in the near future and wait for significantly cheaper entry prices. Bayer AG shares would have to lose 25% to show their current value to some extent, which corresponds to a share price of 36 euros.
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