Kesko Oyj (HLSE:KESKOB), a consumer retailing company based in Finland, saw a double-digit share price rise of over 10% in the past couple of months on the HLSE. 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. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Kesko Oyj’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for Kesko Oyj
Is Kesko Oyj still cheap?
According to my valuation model, the stock is currently overvalued by about 35%, trading at €50.24 compared to my intrinsic value of €37.3. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that Kesko Oyj’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from Kesko Oyj?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 Kesko Oyj, it is expected to deliver a relatively unexciting earnings growth of 1.07%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in KESKOB’s future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe KESKOB should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on KESKOB for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.