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Let's talk about the popular HEICO Corporation (NYSE:HEI). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$279 at one point, and dropping to the lows of US$237. 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 US$237 reflective of the actual value of the large-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.
View our latest analysis for HEICO
What's The Opportunity In HEICO?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 12% below our intrinsic value, which means if you buy HEICO today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $270.48, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because HEICO’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 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. 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. HEICO's earnings over the next few years are expected to increase by 48%, 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 its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on HEI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.