Howden Joinery Group Plc (LON:HWDN), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£7.20 and falling to the lows of UK£6.53. 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 Howden Joinery Group's current trading price of UK£6.61 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Howden Joinery Group’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 Howden Joinery Group?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.25% above my intrinsic value, which means if you buy Howden Joinery Group today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is £6.28, then there isn’t really any room for the share price grow beyond what it’s currently trading. What's more, Howden Joinery Group’s share price may be more stable over time (relative to the market), as indicated by its low beta.
Can we expect growth from Howden Joinery Group?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 -17% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Howden Joinery Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, HWDN 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 reduce the risk in your portfolio. Is your current exposure to the stock beneficial 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 an eye on HWDN for a while, now may not be the most advantageous 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. 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 HWDN should the price fluctuate below its true value.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Howden Joinery Group has 2 warning signs (and 1 which is concerning) we think you should know about.
If you are no longer interested in Howden Joinery Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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