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H&R GmbH & Co. KGaA (ETR:2HRA), might not be a large cap stock, but it saw significant share price movement during recent months on the XTRA, rising to highs of €5.34 and falling to the lows of €4.79. 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 H&R GmbH KGaA's current trading price of €4.85 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at H&R GmbH KGaA’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 H&R GmbH KGaA
What Is H&R GmbH KGaA Worth?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 10.8x is currently trading in-line with its industry peers’ ratio, which means if you buy H&R GmbH KGaA today, you’d be paying a relatively reasonable price for it. Is there another opportunity to buy low in the future? Since H&R GmbH KGaA’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will H&R GmbH KGaA generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted profit growth of 7.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for H&R GmbH KGaA, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in 2HRA’s growth outlook, with shares trading around industry price multiples. 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 2HRA? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?