At UK£8.74, Is It Time To Put Howden Joinery Group Plc (LON:HWDN) On Your Watch List?

Howden Joinery Group Plc (LON:HWDN), might not be a large cap stock, but it saw a decent share price growth of 19% on the LSE over the last few months. The recent jump in the share price has meant that the company is trading around its 52-week high. 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. But what if there is still an opportunity to buy? Let’s examine Howden Joinery Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Howden Joinery Group

What's The Opportunity In Howden Joinery Group?

The stock is currently trading at UK£8.74 on the share market, which means it is overvalued by 29% compared to our intrinsic value of £6.78. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Howden Joinery Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Howden Joinery Group 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 27% over the next couple of years, the future seems bright for Howden Joinery Group. 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? HWDN’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe HWDN should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on HWDN for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for HWDN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Howden Joinery Group at this point in time. While conducting our analysis, we found that Howden Joinery Group has 2 warning signs and it would be unwise to ignore them.

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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.