Today we're going to take a look at the well-established Stora Enso Oyj (HEL:STERV). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the HLSE. 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 examine Stora Enso Oyj’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Stora Enso Oyj worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.50% above my intrinsic value, which means if you buy Stora Enso Oyj today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth €15.49, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Stora Enso 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.
What does the future of Stora Enso Oyj 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. However, with a negative profit growth of -4.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Stora Enso Oyj. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, STERV appears to be trading around its fair value, 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 beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on STERV for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which 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 crystalize your views on STERV should the price fluctuate below its true value.
If you'd like to know more about Stora Enso Oyj as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with Stora Enso Oyj (including 1 which is a bit unpleasant).
If you are no longer interested in Stora Enso 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.