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The Howard Hughes Corporation (NYSE:HHC), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. As a US$5.3b market-cap stock, it seems odd Howard Hughes is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s examine Howard Hughes’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Howard Hughes worth?
According to my valuation model, Howard Hughes seems to be fairly priced at around 18.87% above my intrinsic value, which means if you buy Howard Hughes today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $81.88, 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 Howard Hughes’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.
What kind of growth will Howard Hughes generate?
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 an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Howard Hughes, at least in the near future.
What this means for you:
Are you a shareholder? HHC 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 optimal 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 tabs on HHC 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. 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 HHC should the price fluctuate below its true value.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For instance, we've identified 2 warning signs for Howard Hughes (1 is a bit concerning) you should be familiar with.
If you are no longer interested in Howard Hughes, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. 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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