Stock Analysis

Why H & M Hennes & Mauritz AB (publ) (STO:HM B) Could Be Worth Watching

Source: Shutterstock

Let's talk about the popular H & M Hennes & Mauritz AB (publ) (STO:HM B). The company's shares saw a decent share price growth in the teens level on the OM over the last few months. 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 H & M Hennes & Mauritz’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for H & M Hennes & Mauritz

Is H & M Hennes & Mauritz Still Cheap?

According to my valuation model, H & M Hennes & Mauritz seems to be fairly priced at around 9.62% above my intrinsic value, which means if you buy H & M Hennes & Mauritz today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth SEK112.15, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because H & M Hennes & Mauritz’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from H & M Hennes & Mauritz?

OM:HM B Earnings and Revenue Growth March 16th 2023

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. With profit expected to more than double over the next couple of years, the future seems bright for H & M Hennes & Mauritz. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? HM B’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on HM B, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing H & M Hennes & Mauritz at this point in time. You'd be interested to know, that we found 2 warning signs for H & M Hennes & Mauritz and you'll want to know about these.

If you are no longer interested in H & M Hennes & Mauritz, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Valuation is complex, but we're helping make it simple.

Find out whether H & M Hennes & Mauritz is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis