Harsco Corporation (NYSE: HSC), an industrials business with a market capitalization of $1.8 billion, saw its share price increase by 31.0% over the last month. As a small-cap stock with decent coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could shares still be trading at a relatively cheap price? Let’s take a look at Harsco’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
Is Harsco Still Cheap?
The stock seems fairly valued at the moment according to 9 separate valuation analyses. Shares are trading roughly 4% above its intrinsic value. This means if you were to buy Harsco today, you’d be paying a reasonable price for it. If you believe that the stock is really worth $20.69, then there isn’t much room for the share price to appreciate beyond where it’s currently trading.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$18.41||-15.0%|
|5-yr DCF Revenue Exit||$21.91||1.2%|
|Peer Revenue Multiples||$24.46||13.0%|
|10-yr DCF EBITDA Exit||$24.12||11.4%|
|5-yr DCF EBITDA Exit||$29.63||36.9%|
|Peer EBITDA Multiples||$30.08||38.9%|
|10-yr DCF Growth Exit||$13.48||-37.7%|
|5-yr DCF Growth Exit||$13.05||-39.7%|
|Peer P/E Multiples||$11.05||-48.9%|
Click on any of the analyses above to view the latest model with real-time data.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
Although, there may be an opportunity to buy in the future. This is because Harsco’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 Does The Future Of Harsco Look Like?
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.
source: finbox.io data explorer
With Harsco’s relatively muted top-line growth of 3.2% expected over the next five years on average, growth doesn’t seem like a key catalyst for a buying decision, at least in the short to medium-term.
How This Impacts You
Many investors separate stocks into value and growth categories based on quantitative metrics. However, one of the most famous investors in the world views this as foolish. In Warren Buffett’s 1992 letter to Berkshire Hathaway shareholders, Buffett touches upon a subject at odds with much of the investment industry:
“Most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth.’ Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value.”
While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company’s value.
Harsco’s future growth is relatively low and the stock appears fairly valued at the moment according to our valuation models. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of Harsco, it may be worth holding off until the stock develops a larger margin of safety.
But before making an investment decision, I recommend you continue to research Harsco to get a more comprehensive view of the company by looking at:
Valuation Metrics: what is Harsco’s free cash flow yield and how does it compare to its publicly traded peers? This metric measures the amount of free cash flow for each dollar of equity (market capitalization). Analyze the free cash flow yield here.
Risk Metrics: what is Harsco’s asset efficiency? This ratio measures the amount of cash flow that a company generates from its assets. View the company’s asset efficiency here.
Efficiency Metrics: return on equity is used to measure the return that a firm generates on the book value of common equity. View Harsco’s return on equity here.
Author: Brian Dentino
Expertise: financial technology, analyzing market trends
Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors.
Brian can be reached at [email protected]
As of this writing, Brian did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.