At €86.78, Is Heineken N.V. (AMS:HEIA) Worth Looking At Closely?

Today we're going to take a look at the well-established Heineken N.V. (AMS:HEIA). The company's stock received a lot of attention from a substantial price movement on the ENXTAM over the last few months, increasing to €104 at one point, and dropping to the lows of €79.20. 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 Heineken's current trading price of €86.78 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 Heineken’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Heineken

Is Heineken still cheap?

Great news for investors – Heineken is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 15.03x is currently well-below the industry average of 20.94x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Heineken’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Heineken look like?

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. Though in the case of Heineken, it is expected to deliver a negative earnings growth of -16%, 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? Although HEIA is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to HEIA, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on HEIA for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Heineken as a business, it's important to be aware of any risks it's facing. Our analysis shows 3 warning signs for Heineken (1 is concerning!) and we strongly recommend you look at these before investing.

If you are no longer interested in Heineken, 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.