At €86.30, Is It Time To Put HELLA GmbH & Co. KGaA (ETR:HLE) On Your Watch List?

Today we're going to take a look at the well-established HELLA GmbH & Co. KGaA (ETR:HLE). The company's stock had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of €85.20 to €91.30. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at HELLA GmbH KGaA’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for HELLA GmbH KGaA

Is HELLA GmbH KGaA Still Cheap?

HELLA GmbH KGaA is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 29.21x is currently well-above the industry average of 8.83x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that HELLA GmbH KGaA’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of HELLA GmbH KGaA 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. With profit expected to grow by 47% over the next couple of years, the future seems bright for HELLA GmbH KGaA. 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? HLE’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe HLE should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on HLE for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for HLE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for HELLA GmbH KGaA from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in HELLA GmbH KGaA, 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.