First Hawaiian, Inc. (NASDAQ:FHB), operating in the financial services industry based in United States, saw a decent share price growth in the teens level on the NASDAQGS over the last few months. 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? Let’s examine First Hawaiian’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in First Hawaiian?
According to my valuation model, First Hawaiian seems to be fairly priced at around 16% below my intrinsic value, which means if you buy First Hawaiian today, you’d be paying a fair price for it. And if you believe that the stock is really worth $34.16, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that First Hawaiian’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from First Hawaiian?
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 -2.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for First Hawaiian. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? FHB seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in 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 the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on FHB for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, 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 FHB should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on First Hawaiian. You can find everything you need to know about First Hawaiian in the latest infographic research report. If you are no longer interested in First Hawaiian, 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 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.
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