When Should You Buy Halfords Group plc (LON:HFD)?
While Halfords Group plc (LON:HFD) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the LSE over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Halfords Group’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Halfords Group
What Is Halfords Group Worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 0.63% above my intrinsic value, which means if you buy Halfords Group today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth £1.64, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Halfords Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Halfords Group?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -11% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Halfords Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? HFD seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on HFD for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on HFD should the price fluctuate below its true value.
So while earnings quality is important, it's equally important to consider the risks facing Halfords Group at this point in time. When we did our research, we found 4 warning signs for Halfords Group (1 is potentially serious!) that we believe deserve your full attention.
If you are no longer interested in Halfords Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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