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? Today I will analyse the most recent data on JB Hi-Fi’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for JB Hi-Fi

What's the opportunity in JB Hi-Fi?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that JB Hi-Fi’s ratio of 9.61x is trading slightly above its industry peers’ ratio of 9.49x, which means if you buy JB Hi-Fi today, you’d be paying a relatively sensible price for it. And if you believe that JB Hi-Fi should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like JB Hi-Fi’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

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. 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. 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? Currently, JBH appears to be trading around industry price multiples, 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 optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on JBH, take a look at whether its fundamentals have changed.