Is Hufvudstaden AB (publ) (STO:HUFV A) Potentially Undervalued?

Hufvudstaden AB (publ) (STO:HUFV A), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the OM. 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? Today I will analyse the most recent data on Hufvudstaden’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Hufvudstaden

What's The Opportunity In Hufvudstaden?

Hufvudstaden appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 11.55x is currently well-above the industry average of 5.51x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Hufvudstaden’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What does the future of Hufvudstaden 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. 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 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 Hufvudstaden, at least in the near future.

What This Means For You

Are you a shareholder? If you believe HUFV A should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on HUFV A for a while, now may not be the best time to enter into the stock. The price has climbed past its industry peers, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 2 warning signs for Hufvudstaden you should be aware of.

If you are no longer interested in Hufvudstaden, 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.