At $18.1, Is Husky Energy Inc (TSE:HSE) A Buy?
Husky Energy Inc (TSX:HSE) saw a decent share price growth in the teens level on the TSX over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Husky Energy’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Husky Energy
Is Husky Energy still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 19.58x is currently trading slightly above its industry peers’ ratio of 18.83x, which means if you buy Husky Energy today, you’d be paying a relatively reasonable price for it. And if you believe that Husky Energy should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Husky Energy’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Husky Energy?
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. Husky Energy’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? HSE’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at HSE? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on HSE, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for HSE, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Husky Energy. You can find everything you need to know about Husky Energy in the latest infographic research report. If you are no longer interested in Husky Energy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
