Is It Too Late To Consider Buying Hillenbrand, Inc. (NYSE:HI)?

By
Simply Wall St
Published
July 24, 2021
NYSE:HI
Source: Shutterstock

Hillenbrand, Inc. (NYSE:HI), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$50.49 at one point, and dropping to the lows of US$41.05. 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 Hillenbrand's current trading price of US$44.47 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Hillenbrand’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Hillenbrand

What's the opportunity in Hillenbrand?

Good news, investors! Hillenbrand is still a bargain right now according to my price multiple model, which compares 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 Hillenbrand’s ratio of 19.51x is below its peer average of 33.59x, which indicates the stock is trading at a lower price compared to the Machinery industry. However, given that Hillenbrand’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Hillenbrand look like?

earnings-and-revenue-growth
NYSE:HI Earnings and Revenue Growth July 24th 2021

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. In the upcoming year, Hillenbrand's earnings are expected to increase by 36%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since HI is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on HI for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy HI. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

So while earnings quality is important, it's equally important to consider the risks facing Hillenbrand at this point in time. Case in point: We've spotted 1 warning sign for Hillenbrand you should be aware of.

If you are no longer interested in Hillenbrand, 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. 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.
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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.