When Should You Buy Methanex Corporation (TSE:MX)?
Methanex Corporation (TSE:MX), is not the largest company out there, but it saw significant share price movement during recent months on the TSX, rising to highs of CA$63.49 and falling to the lows of CA$51.28. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Methanex's current trading price of CA$55.11 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Methanex’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Methanex
Is Methanex Still Cheap?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Methanex’s ratio of 9.45x is trading slightly above its industry peers’ ratio of 8.87x, which means if you buy Methanex today, you’d be paying a relatively sensible price for it. And if you believe Methanex should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Methanex’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Methanex?
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. 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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Methanex, at least in the near future.
What This Means For You
Are you a shareholder? Currently, MX appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on MX, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on MX for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on MX should the price fluctuate below the industry PE ratio.
If you'd like to know more about Methanex as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Methanex (of which 1 makes us a bit uncomfortable!) you should know about.
If you are no longer interested in Methanex, 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.
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