Is Now The Time To Look At Buying Halfords Group plc (LON:HFD)?

While Halfords Group plc (LON:HFD) 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 LSE. As a 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 Halfords Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Halfords Group

Is Halfords Group Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14.57% above my intrinsic value, which means if you buy Halfords Group today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth £1.68, then there isn’t really any room for the share price grow beyond what it’s currently trading. 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.

What kind of growth will Halfords Group generate?

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 -6.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Halfords Group. This certainty tips the risk-return scale towards higher risk.

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 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 an eye on HFD 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. 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 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. Every company has risks, and we've spotted 1 warning sign for Halfords Group you should know about.

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.