hGears AG (ETR:HGEA), might not be a large cap stock, but it led the XTRA gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today we will analyse the most recent data on hGears’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for hGears

What Is hGears Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 19.51% above our intrinsic value, which means if you buy hGears today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth €2.67, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because hGears’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 kind of growth will hGears 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 hGears, it is expected to deliver a relatively unexciting earnings growth of 2.2%, 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? HGEA’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on HGEA, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.