When Should You Buy Hapag-Lloyd Aktiengesellschaft (ETR:HLAG)?

Today we're going to take a look at the well-established Hapag-Lloyd Aktiengesellschaft (ETR:HLAG). The company's stock saw significant share price movement during recent months on the XTRA, rising to highs of €359 and falling to the lows of €180. 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 Hapag-Lloyd's current trading price of €186 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 Hapag-Lloyd’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 Hapag-Lloyd

What Is Hapag-Lloyd Worth?

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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 2.21x is currently trading slightly below its industry peers’ ratio of 5.34x, 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. Although, there may be an opportunity to buy in the future. This is because Hapag-Lloyd’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 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. 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 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 an eye 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. 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 crystallize your views on HLAG should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 3 warning signs for Hapag-Lloyd (1 is significant) you should be familiar with.

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.

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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.