Is There Now An Opportunity In Neo Performance Materials Inc. (TSE:NEO)?
Neo Performance Materials Inc. (TSE:NEO), might not be a large cap stock, but it saw a decent share price growth of 10% on the TSX over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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. However, what if the stock is still a bargain? Let’s examine Neo Performance Materials’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Neo Performance Materials
Is Neo Performance Materials Still Cheap?
According to our valuation model, Neo Performance Materials seems to be fairly priced at around 5.87% above our intrinsic value, which means if you buy Neo Performance Materials today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth CA$7.08, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Neo Performance Materials’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 Neo Performance Materials?
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. With revenues expected to grow by a double-digit 30% over the next couple of years, the outlook is positive for Neo Performance Materials. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in NEO’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on NEO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Neo Performance Materials at this point in time. You'd be interested to know, that we found 1 warning sign for Neo Performance Materials and you'll want to know about this.
If you are no longer interested in Neo Performance Materials, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
