Is It Time To Consider Buying HOCHTIEF Aktiengesellschaft (ETR:HOT)?

HOCHTIEF Aktiengesellschaft (ETR:HOT), is not the largest company out there, but it saw significant share price movement during recent months on the XTRA, rising to highs of €81.50 and falling to the lows of €70.62. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether HOCHTIEF's current trading price of €70.62 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at HOCHTIEF’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for HOCHTIEF

Is HOCHTIEF still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that HOCHTIEF’s ratio of 13.27x is trading slightly below its industry peers’ ratio of 14.36x, which means if you buy HOCHTIEF today, you’d be paying a reasonable price for it. And if you believe that HOCHTIEF should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since HOCHTIEF’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 does the future of HOCHTIEF look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 68% over the next couple of years, the future seems bright for HOCHTIEF. 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? HOT’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at HOT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on HOT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for HOT, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 4 warning signs for HOCHTIEF (1 makes us a bit uncomfortable!) and we strongly recommend you look at them before investing.

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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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