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Is Now The Time To Look At Buying Evonik Industries AG (ETR:EVK)?

Simply Wall St

Let's talk about the popular Evonik Industries AG (ETR:EVK). The company's shares received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €27.36 at one point, and dropping to the lows of €22.41. 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 Evonik Industries's current trading price of €22.41 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 Evonik Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Evonik Industries

Is Evonik Industries still cheap?

Good news, investors! Evonik Industries is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 13.93x is currently well-below the industry average of 19.23x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Evonik Industries’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

What does the future of Evonik Industries look like?

XTRA:EVK Past and Future Earnings, March 1st 2020

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. Though in the case of Evonik Industries, it is expected to deliver a relatively unexciting earnings growth of 6.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since EVK is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on EVK for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy EVK. 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Evonik Industries. You can find everything you need to know about Evonik Industries in the latest infographic research report. If you are no longer interested in Evonik Industries, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.