Why JB Hi-Fi Limited (ASX:JBH) Could Be Worth Watching

JB Hi-Fi Limited (ASX:JBH), is not the largest company out there, but it saw a decent share price growth of 19% on the ASX over the last few months. The recent share price gains has brought the company back closer to its yearly peak. 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 JB Hi-Fi’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View 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 11% below our intrinsic value, which means if you buy JB Hi-Fi today, you’d be paying a fair price for it. And if you believe the company’s true value is A$74.94, 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?

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. 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. Though in the case of JB Hi-Fi, it is expected to deliver a negative earnings growth of -8.1%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

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 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 JBH 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. 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 2 warning signs for JB Hi-Fi (1 doesn't sit too well with us) you should be familiar with.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com