When Should You Buy HOCHTIEF Aktiengesellschaft (ETR:HOT)?

HOCHTIEF Aktiengesellschaft (ETR:HOT), might not be a large cap stock, but it saw a decent share price growth of 13% on the XTRA over the last few months. The recent jump in the share price has meant that the company is trading around its 52-week high. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine HOCHTIEF’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for HOCHTIEF

What Is HOCHTIEF Worth?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio 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 HOCHTIEF’s ratio of 12.02x is trading slightly below its industry peers’ ratio of 13.37x, 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. Although, there may be an opportunity to buy in the future. This is because HOCHTIEF’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will HOCHTIEF generate?

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. Though in the case of HOCHTIEF, it is expected to deliver a relatively unexciting earnings growth of 3.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? HOT’s 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 confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on HOT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about HOCHTIEF as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for HOCHTIEF you should be aware of.

If you are no longer interested in HOCHTIEF, 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.