Today we’re going to take a look at the well-established Imperial Oil Limited (TSX:IMO). The company’s stock saw significant share price volatility over the past couple of months on the TSX, rising to the highs of CA$40.46 and falling to the lows of CA$34.19. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Imperial Oil’s current trading price of CA$35.09 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Imperial Oil’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Imperial Oil
What is Imperial Oil worth?
The stock is currently trading at CA$35.09 on the share market, which means it is overvalued by 53% compared to my intrinsic value of CA$22.94. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Since Imperial Oil’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Imperial Oil?
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 a negative profit growth of -16.75% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Imperial Oil. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe IMO should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on IMO for a while, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Imperial Oil. You can find everything you need to know about Imperial Oil in the latest infographic research report. If you are no longer interested in Imperial Oil, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.