When Should You Buy Metsä Board Oyj (HEL:METSB)?

While Metsä Board Oyj (HEL:METSB) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the HLSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Metsä Board Oyj’s outlook and valuation to see if the opportunity still exists.

Check out the opportunities and risks within the XX Forestry industry.

What's The Opportunity In Metsä Board Oyj?

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. 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 Metsä Board Oyj’s ratio of 8.22x is trading slightly above its industry peers’ ratio of 8.19x, which means if you buy Metsä Board Oyj today, you’d be paying a relatively reasonable price for it. And if you believe Metsä Board Oyj should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, Metsä Board Oyj’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Metsä Board 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. However, with a negative profit growth of -19% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Metsä Board Oyj. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, METSB 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 de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on METSB, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on METSB for a while, now may not be the most advantageous 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 METSB should the price fluctuate below the industry PE ratio.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Metsä Board Oyj has 2 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Metsä Board 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.