Is There Now An Opportunity In Hapag-Lloyd Aktiengesellschaft (ETR:HLAG)?

Let's talk about the popular Hapag-Lloyd Aktiengesellschaft (ETR:HLAG). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the XTRA. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Hapag-Lloyd’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Our analysis indicates that HLAG is potentially undervalued!

What's The Opportunity In Hapag-Lloyd?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Hapag-Lloyd’s ratio of 2.23x is trading slightly below its industry peers’ ratio of 5.84x, which means if you buy Hapag-Lloyd today, you’d be paying a decent price for it. And if you believe Hapag-Lloyd 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. So, is there another chance to buy low in the future? Given that Hapag-Lloyd’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Hapag-Lloyd 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. 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 Hapag-Lloyd, it is expected to deliver a highly negative earnings growth in the next few years, 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, HLAG appears to be trading around industry price multiples, 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 HLAG, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on HLAG for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, 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 gel your views on HLAG should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Hapag-Lloyd, you'd also look into what risks it is currently facing. Be aware that Hapag-Lloyd is showing 3 warning signs in our investment analysis and 1 of those is a bit concerning...

If you are no longer interested in Hapag-Lloyd, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.