What Does Metsä Board Oyj's (HEL:METSB) Share Price Indicate?

While Metsä Board Oyj (HEL:METSB) might not be the most widely known stock at the moment, it led the HLSE gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Metsä Board Oyj’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Metsä Board Oyj

What's the opportunity in Metsä Board Oyj?

Metsä Board Oyj appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 22.3x is currently well-above the industry average of 13.7x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Metsä Board Oyj’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Metsä Board Oyj generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 23% over the next couple of years, the future seems bright for Metsä Board Oyj. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? METSB’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe METSB should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on METSB for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for METSB, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 1 warning sign for Metsä Board Oyj you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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