JB Hi-Fi Limited (ASX:JBH), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the ASX. As a mid-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? Let’s examine JB Hi-Fi’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for JB Hi-Fi

What Is JB Hi-Fi Worth?

According to my valuation model, JB Hi-Fi seems to be fairly priced at around 17% below my intrinsic value, which means if you buy JB Hi-Fi today, you’d be paying a reasonable price for it. And if you believe the company’s true value is A$50.93, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, JB Hi-Fi’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will JB Hi-Fi 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. 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. Though in the case of JB Hi-Fi, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? JBH seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on JBH for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on JBH should the price fluctuate below its true value.