Is Now The Time To Look At Buying HELLA GmbH & Co. KGaA (ETR:HLE)?

Today we're going to take a look at the well-established HELLA GmbH & Co. KGaA (ETR:HLE). The company's stock saw its share price hover around a small range of €81.40 to €86.50 over the last few weeks. But is this actually reflective of the share value 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.

See our latest analysis for HELLA GmbH KGaA

What's The Opportunity In HELLA GmbH KGaA?

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. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that HELLA GmbH KGaA’s ratio of 37.06x is above its peer average of 9.05x, which suggests the stock is trading at a higher price compared to the Auto Components industry. But, is there another opportunity to buy low in the future? Since HELLA GmbH KGaA’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 HELLA GmbH KGaA 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. 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. HELLA GmbH KGaA's earnings over the next few years are expected to increase by 95%, 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? It seems like the market has well and truly priced in HLE’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I 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 tabs on HLE for some time, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 1 warning sign for HELLA GmbH KGaA and we think they deserve your attention.

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.

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