Hudbay Minerals Inc (NYSE:HBM), a metals and mining company based in Canada, saw a significant share price rise of over 20% in the past couple of months on the NYSE. 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. However, what if the stock is still a bargain? Let’s examine HBM’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for HBM
What's the opportunity in HBM?
HBM 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 196.1x is currently well-above the industry average of 22.8x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since HBM’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much HBM moves relative to the rest of the market.
Can we expect growth from HBM?
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. HBM’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? HBM’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I 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 optimistic prospect 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.