Q: Hi, Hammond Power stock has been on a tear, for all good reasons, as noted in numerous 5i comments. However, it seems that the valuation has also moved up to a forward PE of 21.5 up from 10.5 less than a year ago. The stock has historically been volatile after company's earning release. What could be the factors, in your assessment, which could cause a pullback in the stock ( If any ), post March 27 earnings ? And, if it does, would to consider it to be a buying opportunity and at what price level ?
Could you please also provide the street estimates.
Thank You
Could you please also provide the street estimates.
Thank You
5i Research Answer:
HPS.A is trading at 23x Forward P/E, and growth in the last five years was around 18.5%, mostly organic. Valuation considering the growth profile and growth potential does not seem to crazy to us. That said, the factor that could potentially make a pullback in the stock is if the business experiences some slowdown in growth prospects due to some mild cyclicality of the business. However, we would buy more aggressively if it ever got back to below $100.