Is There Now An Opportunity In Hero MotoCorp Limited (NSE:HEROMOTOCO)?

Today we're going to take a look at the well-established Hero MotoCorp Limited (NSE:HEROMOTOCO). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. The recent jump in the share price has meant that the company is trading around its 52-week high. With many analysts covering the large-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 Hero MotoCorp’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Hero MotoCorp

What Is Hero MotoCorp Worth?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Hero MotoCorp’s ratio of 27.78x is trading slightly below its industry peers’ ratio of 29.61x, which means if you buy Hero MotoCorp today, you’d be paying a decent price for it. And if you believe that Hero MotoCorp should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like Hero MotoCorp’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Hero MotoCorp look like?

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. Hero MotoCorp's earnings over the next few years are expected to increase by 48%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in HEROMOTOCO’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at HEROMOTOCO? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on HEROMOTOCO, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for HEROMOTOCO, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Hero MotoCorp.

If you are no longer interested in Hero MotoCorp, 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.