DEUTZ Fair Value Estimate Suggests Undervaluation of 47%

DEUTZ Aktiengesellschaft (ETR:DEZ) is estimated to be 47% undervalued with a projected fair value of €17.44 based on 2 Stage Free Cash Flow to Equity. The current share price is €9.27, and analyst price target is €10.15, which is 42% below the fair value estimate.

DEUTZ Aktiengesellschaft (ETR:DEZ), a prominent German manufacturer of diesel and gas engines, is currently trading at a significant discount. According to a recent analysis, the stock is estimated to be 47% undervalued, with a projected fair value of €17.44 based on the 2 Stage Free Cash Flow to Equity method [1]. This valuation stands in stark contrast to the current share price of €9.27 and the analyst price target of €10.15, which is 42% below the fair value estimate.

The company's financial health is a mixed bag. While its financial health score is rated 4/6, its past performance score is relatively low at 1/6, indicating a need for improvement. The company has shown a strong historical performance, with a 104.01% increase in share price over the past year, and a 113.79% increase over the past three years [2]. However, its profit margins have been declining, with a recent drop from 4.1% to 1.2%, and its earnings per share (EPS) have been volatile, with a loss of €0.07 in the first quarter of 2025 [3].

One of the key factors contributing to DEUTZ's undervaluation is its balance sheet strain. The company has a high debt-to-equity ratio of 39.4%, which can be a cause for concern among investors [4]. Additionally, the company's dividend yield of 1.8% is not well covered by earnings, which may impact its attractiveness to income-oriented investors [5].

Despite these challenges, DEUTZ has been actively pursuing strategic acquisitions to enhance its revenue growth and profitability. For instance, it recently completed the acquisition of Urban Mobility Systems B.V. and entered into an agreement to acquire the lower-power-range engines business from Rolls-Royce Power Systems AG [6]. These acquisitions are expected to drive future success, but they also come with additional financial risks.

In conclusion, DEUTZ Aktiengesellschaft (ETR:DEZ) presents an intriguing investment opportunity for those willing to take on higher risk. With a projected fair value of €17.44, the stock is currently trading at a significant discount. However, investors should be mindful of the company's balance sheet strain and volatile earnings history before making a decision. As always, thorough research and a long-term perspective are essential when considering investments in undervalued stocks.

References:
[1] https://simplywall.st/stocks/de/capital-goods/etr-dez/deutz-shares
[2] https://simplywall.st/stocks/de/capital-goods/etr-dez/deutz-shares
[3] https://simplywall.st/stocks/de/capital-goods/etr-dez/deutz-shares
[4] https://simplywall.st/stocks/de/capital-goods/etr-dez/deutz-shares
[5] https://simplywall.st/stocks/de/capital-goods/etr-dez/deutz-shares
[6] https://simplywall.st/stocks/de/capital-goods/etr-dez/deutz-shares