HC2 Holdings, Inc. (NYSE:HCHC), which is in the construction business, and is based in United States, saw significant share price movement during recent months on the NYSE, rising to highs of $3.55 and falling to the lows of $2.47. 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 HC2 Holdings’s current trading price of $2.62 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 HC2 Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in HC2 Holdings?
Good news, investors! HC2 Holdings is still a bargain right now. 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 HC2 Holdings’s ratio of 0.83x is below its peer average of 17.29x, which suggests the stock is undervalued compared to the Construction industry. However, given that HC2 Holdings’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 HC2 Holdings 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. 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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for HC2 Holdings, at least in the near future.
What this means for you:
Are you a shareholder? Although HCHC is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to HCHC, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on HCHC for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on HC2 Holdings. You can find everything you need to know about HC2 Holdings in the latest infographic research report. If you are no longer interested in HC2 Holdings, 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 firstname.lastname@example.org. 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.