Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI), which is in the reits business, and is based in United States, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $28.48 at one point, and dropping to the lows of $25.61. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Hannon Armstrong Sustainable Infrastructure Capital's current trading price of $27.53 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Hannon Armstrong Sustainable Infrastructure Capital’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Hannon Armstrong Sustainable Infrastructure Capital worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 27.75x is currently trading slightly below its industry peers’ ratio of 31.51x, which means if you buy Hannon Armstrong Sustainable Infrastructure Capital today, you’d be paying a fair price for it. And if you believe Hannon Armstrong Sustainable Infrastructure Capital should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. So, is there another chance to buy low in the future? Given that Hannon Armstrong Sustainable Infrastructure Capital’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.
What kind of growth will Hannon Armstrong Sustainable Infrastructure Capital generate?
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. However, with a negative profit growth of -4.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Hannon Armstrong Sustainable Infrastructure Capital. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? HASI 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 HASI, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on HASI for a while, now may not be the most advantageous 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. Furthermore, 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 crystalize your views on HASI should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Hannon Armstrong Sustainable Infrastructure Capital. You can find everything you need to know about Hannon Armstrong Sustainable Infrastructure Capital in the latest infographic research report. If you are no longer interested in Hannon Armstrong Sustainable Infrastructure Capital, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.