Is It Too Late To Consider Buying Halfords Group plc (LON:HFD)?

While Halfords Group plc (LON:HFD) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the LSE over the last few months. With many analysts covering the 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 Halfords Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Halfords Group

What Is Halfords Group Worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.8% below my intrinsic value, which means if you buy Halfords Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £1.79, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Halfords 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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Halfords Group?

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. Though in the case of Halfords Group, it is expected to deliver a negative earnings growth of -6.6%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? HFD seems fairly priced right now, 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 the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on HFD for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears 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 gel your views on HFD should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Halfords Group at this point in time. In terms of investment risks, we've identified 1 warning sign with Halfords Group, and understanding this should be part of your investment process.

If you are no longer interested in Halfords Group, 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.