Is It Time To Consider Buying Héroux-Devtek Inc. (TSE:HRX)?

By
Simply Wall St
Published
June 10, 2021
TSX:HRX
Source: Shutterstock

Héroux-Devtek Inc. (TSE:HRX), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the TSX over the last few months. With many analysts covering the 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? Let’s examine Héroux-Devtek’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Héroux-Devtek

What is Héroux-Devtek worth?

Great news for investors – Héroux-Devtek is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is CA$25.11, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Héroux-Devtek’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

What kind of growth will Héroux-Devtek generate?

earnings-and-revenue-growth
TSX:HRX Earnings and Revenue Growth June 11th 2021

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. With profit expected to more than double over the next couple of years, the future seems bright for Héroux-Devtek. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? Since HRX is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on HRX for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy HRX. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

If you'd like to know more about Héroux-Devtek as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Héroux-Devtek you should know about.

If you are no longer interested in Héroux-Devtek, 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. 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.