Why HMM Co.,Ltd (KRX:011200) Could Be Worth Watching

Today we're going to take a look at the well-established HMM Co.,Ltd (KRX:011200). The company's stock saw significant share price movement during recent months on the KOSE, rising to highs of ₩22,150 and falling to the lows of ₩17,690. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether HMMLtd's current trading price of ₩18,940 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at HMMLtd’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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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. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 4.46x is currently trading slightly below its industry peers’ ratio of 4.49x, which means if you buy HMMLtd today, you’d be paying a decent price for it. And if you believe HMMLtd should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. 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.

View our latest analysis for HMMLtd

Can we expect growth from HMMLtd?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for HMMLtd, at least in the near future.

What This Means For You

Are you a shareholder? Currently, A011200 appears to be trading around industry price multiples, 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 optimal 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. 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 crystallize 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. When we did our research, we found 3 warning signs for HMMLtd (1 is a bit concerning!) that we believe deserve your full attention.

If you are no longer interested in HMMLtd, 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.