Hardwoods Distribution Inc. (TSE:HDI), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the TSX over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Hardwoods Distribution’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Hardwoods Distribution

What's the opportunity in Hardwoods Distribution?

According to my valuation model, the stock is currently overvalued by about 27%, trading at CA$35.41 compared to my intrinsic value of CA$27.80. This means that the opportunity to buy Hardwoods Distribution at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Hardwoods Distribution’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Hardwoods Distribution generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Hardwoods Distribution's earnings over the next few years are expected to increase by 40%, 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? HDI’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe HDI 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 HDI for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for HDI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Hardwoods Distribution as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Hardwoods Distribution you should be aware of.

If you are no longer interested in Hardwoods Distribution, 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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