Should You Think About Buying HMM Co.,Ltd (KRX:011200) Now?

Let's talk about the popular HMM Co.,Ltd (KRX:011200). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the KOSE. While good news for shareholders, the company has traded much higher in the past year. 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 HMMLtd’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for HMMLtd

Is HMMLtd Still Cheap?

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 HMMLtd’s ratio of 9.39x is trading slightly below its industry peers’ ratio of 9.57x, which means if you buy HMMLtd today, you’d be paying a decent price for it. And if you believe that HMMLtd 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. So, is there another chance to buy low in the future? Given that HMMLtd’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 HMMLtd 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 -3.5% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for HMMLtd. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? A011200 seems priced close to industry peers 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 A011200, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on A011200 for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This 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 A011200 should the price fluctuate below the industry PE ratio.

If you'd like to know more about HMMLtd as a business, it's important to be aware of any risks it's facing. Be aware that HMMLtd is showing 4 warning signs in our investment analysis and 2 of those are potentially serious...

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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.