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Is Now The Time To Look At Buying H2O Innovation Inc. (CVE:HEO)?

H2O Innovation Inc. (CVE:HEO), is not the largest company out there, but it saw a decent share price growth in the teens level on the TSXV over the last few months. 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. But what if there is still an opportunity to buy? Let’s examine H2O Innovation’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for H2O Innovation

What is H2O Innovation worth?

Great news for investors – H2O Innovation is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is CA$3.72, but it is currently trading at CA$2.38 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because H2O Innovation’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 H2O Innovation look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. H2O Innovation's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since HEO is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic 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 undervaluation.

Are you a potential investor? If you’ve been keeping an eye on HEO for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy HEO. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for H2O Innovation and you'll want to know about it.

If you are no longer interested in H2O Innovation, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.