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While Huntington Ingalls Industries, Inc. (NYSE:HII) might not be the most widely known stock at the moment, it led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Huntington Ingalls Industries’s outlook and valuation to see if the opportunity still exists.
Is Huntington Ingalls Industries still cheap?
Great news for investors – Huntington Ingalls Industries is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $332.25, but it is currently trading at US$210 on the share market, meaning that there is still an opportunity to buy now. However, given that Huntington Ingalls Industries’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.
Can we expect growth from Huntington Ingalls Industries?
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 a negative profit growth of -6.3% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Huntington Ingalls Industries. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although HII 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 HII, 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 an eye on HII for a while, 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.
So while earnings quality is important, it's equally important to consider the risks facing Huntington Ingalls Industries at this point in time. At Simply Wall St, we found 4 warning signs for Huntington Ingalls Industries and we think they deserve your attention.
If you are no longer interested in Huntington Ingalls Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. 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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