What Is Sensient Technologies Corporation's (NYSE:SXT) Share Price Doing?
While Sensient Technologies Corporation (NYSE:SXT) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. As a US$2.6b market cap stock, it seems odd Sensient Technologies is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Sensient Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Sensient Technologies
Is Sensient Technologies Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Sensient Technologies’s ratio of 20.3x is trading in-line with its industry peers’ ratio, which means if you buy Sensient Technologies today, you’d be paying a relatively reasonable price for it. In addition to this, it seems like Sensient Technologies’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Sensient Technologies look like?
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. With profit expected to grow by 37% over the next couple of years, the future seems bright for Sensient Technologies. 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? SXT’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at SXT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on SXT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for SXT, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Sensient Technologies, you'd also look into what risks it is currently facing. For example, Sensient Technologies has 2 warning signs (and 1 which is significant) we think you should know about.
If you are no longer interested in Sensient Technologies, 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.
