Should You Investigate Wallenius Wilhelmsen ASA (OB:WAWI) At kr82.55?

Wallenius Wilhelmsen ASA (OB:WAWI), is not the largest company out there, but it led the OB gainers with a relatively large price hike in the past couple of weeks. As a mid-cap 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 Wallenius Wilhelmsen’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Wallenius Wilhelmsen

What Is Wallenius Wilhelmsen Worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Wallenius Wilhelmsen’s ratio of 3.68x is trading slightly below its industry peers’ ratio of 4.54x, which means if you buy Wallenius Wilhelmsen today, you’d be paying a reasonable price for it. And if you believe Wallenius Wilhelmsen 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 Wallenius Wilhelmsen’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 does the future of Wallenius Wilhelmsen look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -11% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Wallenius Wilhelmsen. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? WAWI 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 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 WAWI, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on WAWI 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 WAWI should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Wallenius Wilhelmsen at this point in time. Case in point: We've spotted 2 warning signs for Wallenius Wilhelmsen you should be mindful of and 1 of these doesn't sit too well with us.

If you are no longer interested in Wallenius Wilhelmsen, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.