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Why HELLA GmbH & Co. KGaA (ETR:HLE) Could Be Worth Watching

HELLA GmbH & Co. KGaA (ETR:HLE), which is in the auto components business, and is based in Germany, received a lot of attention from a substantial price increase on the XTRA over the last few months. 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. However, could the stock still be trading at a relatively cheap price? Let’s examine HELLA GmbH KGaA’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for HELLA GmbH KGaA

What's the opportunity in HELLA GmbH KGaA?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 18.30% above my intrinsic value, which means if you buy HELLA GmbH KGaA today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth €40.31, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since HELLA GmbH KGaA’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from HELLA GmbH KGaA?

XTRA:HLE Past and Future Earnings, December 11th 2019
XTRA:HLE Past and Future Earnings, December 11th 2019

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 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 HELLA GmbH KGaA, at least in the near future.

What this means for you:

Are you a shareholder? Currently, HLE appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 HLE for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, 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 crystalize your views on HLE 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 HELLA GmbH KGaA. You can find everything you need to know about HELLA GmbH KGaA in the latest infographic research report. If you are no longer interested in HELLA GmbH KGaA, 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 editorial-team@simplywallst.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.

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. Thank you for reading.