Is There Now An Opportunity In Héroux-Devtek Inc. (TSE:HRX)?
Héroux-Devtek Inc. (TSE:HRX), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$16.76 at one point, and dropping to the lows of CA$13.06. 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 Héroux-Devtek's current trading price of CA$14.01 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 Héroux-Devtek’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Héroux-Devtek
Is Héroux-Devtek Still Cheap?
Good news, investors! Héroux-Devtek is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Héroux-Devtek’s ratio of 14.87x is below its peer average of 20.76x, which indicates the stock is trading at a lower price compared to the Aerospace & Defense industry. However, given that Héroux-Devtek’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 does the future of Héroux-Devtek look like?
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. 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. With profit expected to grow by 79% over the next couple of years, the future seems bright for Héroux-Devtek. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since HRX is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on HRX for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy HRX. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
If you'd like to know more about Héroux-Devtek as a business, it's important to be aware of any risks it's facing. For example - Héroux-Devtek has 1 warning sign we think you should be aware of.
If you are no longer interested in Héroux-Devtek, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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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