Is Now The Time To Look At Buying Honkarakenne Oyj (HEL:HONBS)?

While Honkarakenne Oyj (HEL:HONBS) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the HLSE over the last few months, increasing to €7.68 at one point, and dropping to the lows of €6.50. 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 Honkarakenne Oyj's current trading price of €6.50 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Honkarakenne Oyj’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Honkarakenne Oyj

What's the opportunity in Honkarakenne Oyj?

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. 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 10.56x is currently trading slightly below its industry peers’ ratio of 12.62x, which means if you buy Honkarakenne Oyj today, you’d be paying a decent price for it. And if you believe that Honkarakenne Oyj 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. Is there another opportunity to buy low in the future? Since Honkarakenne Oyj’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.

Can we expect growth from Honkarakenne Oyj?

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. Honkarakenne Oyj's earnings over the next few years are expected to increase by 41%, 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 HONBS’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 HONBS? 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 tabs on HONBS, 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 HONBS, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for Honkarakenne Oyj you should be aware of.

If you are no longer interested in Honkarakenne Oyj, 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.