Fisher & Paykel Healthcare Corporation Limited (NZSE:FPH), a medical equipment company based in New Zealand, saw significant share price volatility over the past couple of months on the NZSE, rising to the highs of NZ$14.35 and falling to the lows of NZ$12.45. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Fisher & Paykel Healthcare’s current trading price of NZ$12.94 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Fisher & Paykel Healthcare’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Fisher & Paykel Healthcare
What is Fisher & Paykel Healthcare worth?
Fisher & Paykel Healthcare appears to be overvalued 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 42.68x is currently well-above the industry average of 32.52x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Fisher & Paykel Healthcare’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Fisher & Paykel Healthcare generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Fisher & Paykel Healthcare’s earnings over the next few years are expected to increase by 62.03%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in FPH’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe FPH should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on FPH for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for FPH, which means it’s worth diving deeper into other factors 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 Fisher & Paykel Healthcare. You can find everything you need to know about Fisher & Paykel Healthcare in the latest infographic research report. If you are no longer interested in Fisher & Paykel Healthcare, 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.