Let's talk about the popular H & M Hennes & Mauritz AB (publ) (STO:HM B). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the OM. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine H & M Hennes & Mauritz’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is H & M Hennes & Mauritz still cheap?
H & M Hennes & Mauritz appears to be overvalued by 23.99% at the moment, based on my discounted cash flow valuation. The stock is currently priced at kr166 on the market compared to my intrinsic value of SEK133.56. This means that the buying opportunity has probably disappeared for now. Furthermore, H & M Hennes & Mauritz’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What does the future of H & M Hennes & Mauritz 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 a double-digit 17% over the next couple of years, the outlook is positive for H & M Hennes & Mauritz. 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? It seems like the market has well and truly priced in HM B’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe HM B 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 HM B for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for HM B, 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 H & M Hennes & Mauritz. You can find everything you need to know about H & M Hennes & Mauritz in the latest infographic research report. If you are no longer interested in H & M Hennes & Mauritz, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
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.