Halfords Group plc (LON:HFD), might not be a large cap stock, but it saw a decent share price growth in the teens level on the LSE over the last few months. As a 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 Halfords Group’s outlook and valuation to see if the opportunity still exists.
Is Halfords Group Still Cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.74% above my intrinsic value, which means if you buy Halfords Group today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is £1.84, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Halfords Group’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 Halfords Group?
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 -6.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Halfords Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, HFD 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 an eye on HFD for a while, now may not be the most optimal 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 HFD should the price fluctuate below its true value.
If you'd like to know more about Halfords Group as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Halfords Group you should be aware of.
If you are no longer interested in Halfords 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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