Should You Investigate Heidelberg Materials AG (ETR:HEI) At €94.28?

Today we're going to take a look at the well-established Heidelberg Materials AG (ETR:HEI). The company's stock received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €103 at one point, and dropping to the lows of €86.80. 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 Heidelberg Materials' current trading price of €94.28 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Heidelberg Materials’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 Heidelberg Materials

What Is Heidelberg Materials 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 Heidelberg Materials’s ratio of 9.12x is trading slightly below its industry peers’ ratio of 11.02x, which means if you buy Heidelberg Materials today, you’d be paying a reasonable price for it. And if you believe Heidelberg Materials should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Heidelberg Materials’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 Heidelberg Materials 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. Heidelberg Materials' earnings over the next few years are expected to increase by 21%, 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 already priced in HEI’s positive outlook, 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 HEI? 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 an eye on HEI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for HEI, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Heidelberg Materials as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Heidelberg Materials has 1 warning sign and it would be unwise to ignore it.

If you are no longer interested in Heidelberg Materials, 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.