Is It Too Late To Consider Buying Dr. Hönle AG (ETR:HNL)?

While Dr. Hönle AG (ETR:HNL) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the XTRA. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Dr. Hönle’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Dr. Hönle

Is Dr. Hönle Still Cheap?

Good news, investors! Dr. Hönle is still a bargain right now. According to my valuation, the intrinsic value for the stock is €26.07, but it is currently trading at €20.20 on the share market, meaning that there is still an opportunity to buy now. However, given that Dr. Hönle’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.

Can we expect growth from Dr. Hönle?

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 revenues expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for Dr. Hönle. If the level of expenses is able to be maintained, 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 HNL 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 HNL for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy HNL. 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 buy.

So while earnings quality is important, it's equally important to consider the risks facing Dr. Hönle at this point in time. In terms of investment risks, we've identified 1 warning sign with Dr. Hönle, and understanding this should be part of your investment process.

If you are no longer interested in Dr. Hönle, 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.