Is There Now An Opportunity In Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB)?
Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB), operating in the financial services industry based in United States, saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$20.43 and falling to the lows of US$12.32. 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 Home Bancshares (Conway AR)'s current trading price of US$12.32 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Home Bancshares (Conway AR)’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Home Bancshares (Conway AR)
What is Home Bancshares (Conway AR) worth?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Home Bancshares (Conway AR)’s ratio of 7.14x is trading slightly below its industry peers’ ratio of 9.74x, which means if you buy Home Bancshares (Conway AR) today, you’d be paying a reasonable price for it. And if you believe that Home Bancshares (Conway AR) should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Home Bancshares (Conway AR)’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Home Bancshares (Conway AR) 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. However, with a negative profit growth of -1.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Home Bancshares (Conway AR). This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, HOMB appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 HOMB, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on HOMB for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This 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 gel your views on HOMB should the price fluctuate below the industry PE ratio.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Home Bancshares (Conway AR). You can find everything you need to know about Home Bancshares (Conway AR) in the latest infographic research report. If you are no longer interested in Home Bancshares (Conway AR), you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
