At CA$9.83, Is Héroux-Devtek Inc. (TSE:HRX) Worth Looking At Closely?
While Héroux-Devtek Inc. (TSE:HRX) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$13.35 at one point, and dropping to the lows of CA$8.97. 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 Héroux-Devtek's current trading price of CA$9.83 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 Héroux-Devtek’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 Héroux-Devtek
What is Héroux-Devtek worth?
Great news for investors – Héroux-Devtek is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is CA$15.32, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Héroux-Devtek’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 Héroux-Devtek 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 expected decline of -3.0% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Héroux-Devtek. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although HRX is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to HRX, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on HRX for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 2 warning signs (1 makes us a bit uncomfortable!) that you ought to be aware of before buying any shares in Héroux-Devtek.
If you are no longer interested in Héroux-Devtek, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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