Is Now The Time To Look At Buying JB Hi-Fi Limited (ASX:JBH)?

JB Hi-Fi Limited (ASX:JBH), might not be a large cap stock, but it saw a decent share price growth of 15% on the ASX over the last few months. The recent share price gains has brought the company back closer to its yearly peak. 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, what if the stock is still a bargain? Today we will analyse the most recent data on JB Hi-Fi’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for JB Hi-Fi

What Is JB Hi-Fi Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 10% below our intrinsic value, which means if you buy JB Hi-Fi today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth A$67.61, then there’s not much of an upside to gain from mispricing. Furthermore, JB Hi-Fi’s low beta implies that the stock is less volatile than the wider market.

What does the future of JB Hi-Fi look like?

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 -7.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for JB Hi-Fi. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? JBH seems fairly priced right now, 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 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 tabs on JBH 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. 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 JBH should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing JB Hi-Fi at this point in time. Our analysis shows 2 warning signs for JB Hi-Fi (1 can't be ignored!) and we strongly recommend you look at these before investing.

If you are no longer interested in JB Hi-Fi, 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.