At CA$2.77, Is It Time To Put H2O Innovation Inc. (CVE:HEO) On Your Watch List?

H2O Innovation Inc. (CVE:HEO), might not be a large cap stock, but it led the TSXV gainers with a relatively large price hike in the past couple of weeks. 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, what if the stock is still a bargain? Let’s take a look at H2O Innovation’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for H2O Innovation

What's the opportunity in H2O Innovation?

According to my valuation model, H2O Innovation seems to be fairly priced at around 13.69% above my intrinsic value, which means if you buy H2O Innovation today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth CA$2.44, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, H2O Innovation’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will H2O Innovation generate?

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. H2O Innovation's earnings over the next few years are expected to increase by 68%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? HEO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on HEO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 1 warning sign for H2O Innovation and you'll want to know about this.

If you are no longer interested in H2O Innovation, 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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