In This Article:
Today we're going to take a look at the well-established Heidelberg Materials AG (ETR:HEI). The company's stock received a lot of attention from a substantial price increase on the XTRA over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Heidelberg Materials’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Heidelberg Materials
What's The Opportunity In Heidelberg Materials?
According to our 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. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Heidelberg Materials’s ratio of 11.9x is trading slightly below its industry peers’ ratio of 13.21x, which means if you buy Heidelberg Materials today, you’d be paying a decent price for it. And if you believe Heidelberg Materials should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Heidelberg Materials’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Heidelberg Materials generate?
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. Heidelberg Materials' earnings over the next few years are expected to increase by 25%, 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? It seems like the market has already priced in HEI’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at HEI? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?