Stora Enso Oyj (HEL:STERV), which is in the forestry business, and is based in Finland, saw a double-digit share price rise of over 10% in the past couple of months on the HLSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Stora Enso Oyj’s outlook and valuation to see if the opportunity still exists.
Is Stora Enso Oyj still cheap?
The stock is currently trading at €10.17 on the share market, which means it is overvalued by 23.71% compared to my intrinsic value of €8.22. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Stora Enso Oyj’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 kind of growth will Stora Enso Oyj generate?
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. However, with a negative profit growth of -1.1% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Stora Enso Oyj. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe STERV 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. Given the uncertainty from negative growth in the future, this could be the right time to de-risk your portfolio. 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 STERV for a while, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Stora Enso Oyj. You can find everything you need to know about Stora Enso Oyj in the latest infographic research report. If you are no longer interested in Stora Enso Oyj, 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 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.