At €125, Is HORNBACH Holding AG & Co. KGaA (ETR:HBH) Worth Looking At Closely?

HORNBACH Holding AG & Co. KGaA (ETR:HBH), might not be a large cap stock, but it led the XTRA gainers with a relatively large price hike in the past couple of weeks. As a well-established company, which tends to be well-covered by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at HORNBACH Holding KGaA’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for HORNBACH Holding KGaA

What is HORNBACH Holding KGaA worth?

According to my valuation model, HORNBACH Holding KGaA seems to be fairly priced at around 15% below my intrinsic value, which means if you buy HORNBACH Holding KGaA today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth €147.27, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because HORNBACH Holding KGaA’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 HORNBACH Holding 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. 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. Though in the case of HORNBACH Holding KGaA, it is expected to deliver a negative earnings growth of -0.2%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Currently, HBH appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on HBH for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on HBH should the price fluctuate below its true value.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 2 warning signs for HORNBACH Holding KGaA and you'll want to know about these.

If you are no longer interested in HORNBACH Holding 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.