That the company’s business is in excellent shape is testified by the results of the second quarter of 2022. The published data, in fact, showed an increase in revenues (+ 3.6% to 6.6 billion euros) and profit ( + 50.8% to 267 million). Nonetheless, however, analysts welcomed the data with caution. The main reason is linked to the absence of positive surprises and that the guidance on orders has not been revised upwards despite a maxi contract in Poland.
Therefore, the excellent data had no impact on the performance of the stock. Indeed, the decline in Leonardo shares may not have ended.
The decline in Leonardo shares may not have ended
Leonardo Finmeccanica (MIL: LDO) closed the session on 1 July up by 1.90% compared to the previous session at 9.862 euros.
Weekly time frame: the indications of the graphic analysis
As already pointed out at the beginning of July, Leonardo shares had reached the maximum bullish extension, so a retracement could have been very probable. As can be seen from the graph, the prices have reached the maximum extent in the 10 euro area. From that point on, first a lateral movement began and then a retracement which is still in progress.
With the break of the 9.275 euro area at the end of the week, the doors could have opened to a descent at least up to the 7.7 euro area. The maximum bearish extension, on the other hand, could go to the 6 euro area.
If, on the other hand, we were to start up again, the most probable targets could go to the 15 euro area.
The valuation of the Leonardo stock
The situation regarding Leonardo’s assessment is very clear. Whatever the indicator used, in fact, the valuation based on market multiples expresses a strong underestimation. The fair value, calculated with the discounted cash flow method, then, expresses an undervaluation of approximately 70%. This level of undervaluation is also confirmed by the comparison of Leonardo’s price-to-earnings ratio with that of its competitors at European level and by the Price to Book ratio. Finally, the stock has a very low valuation level if we consider the ratio between price and turnover which is equal to 0.4. This level is, among the main Italian titles, one of the lowest.
The future prospects are also very interesting. A parameter, reported in specialized magazines, which expresses growth expectations for the future, shows an underestimation of over 70%.
According to what is reported in international journals, the average opinion of analysts is to buy with an average target price that expresses an undervaluation of around 30%.
In the medium, the rise on Brunello Cucinelli will be tested