In This Article:
Halfords Group plc (LON:HFD), is not the largest company out there, but it saw a significant share price rise of 36% in the past couple of months on the LSE. The recent share price gains has brought the company back closer to its yearly peak. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Halfords Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's The Opportunity In Halfords Group?
Great news for investors – Halfords Group is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 13.44x is currently well-below the industry average of 18.1x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Halfords Group’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.
View our latest analysis for Halfords Group
Can we expect growth from Halfords Group?
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. With profit expected to grow by 21% over the next couple of years, the future seems bright for Halfords Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since HFD is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.