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HEICO Corporation (NYSE:HEI), which is in the aerospace & defense business, and is based in United States, saw significant share price movement during recent months on the NYSE, rising to highs of $92.61 and falling to the lows of $71.65. 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 HEICO’s current trading price of $76.73 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 HEICO’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for HEICO
Is HEICO still cheap?
HEICO is currently overpriced based on my relative valuation model. 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 39.23x is currently well-above the industry average of 19.2x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, HEICO’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What does the future of HEICO 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. With profit expected to grow by 31% over the next couple of years, the future seems bright for HEICO. 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? It seems like the market has well and truly priced in HEI’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe HEI should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. 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 tabs on HEI for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for HEI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.