Should You Buy Hudbay Minerals Inc (TSX:HBM) Now?
Hudbay Minerals Inc (TSX:HBM), a materials company based in Canada, received a lot of attention from a substantial price increase on the TSX in the over the last few months. As a mid-cap 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? Let’s take a look at HBM’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Hudbay Minerals
What is HBM worth?
HBM is currently overpriced based on my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that HBM’s ratio of 185.7x is above its peer average of 38.9x, which suggests the stock is overvalued compared to the materials industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that HBM’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will HBM 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. With profit expected to more than double over the next couple of years, the future seems bright for HBM. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in HBM’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 HBM 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 HBM 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 HBM, 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 Hudbay Minerals. You can find everything you need to know about HBM in the latest infographic research report. If you are no longer interested in Hudbay Minerals, 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.
