Intrepid Potash Inc (NYSE:IPI), a chemicals company based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. 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, could the stock still be trading at a relatively cheap price? Let’s examine Intrepid Potash’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View out our latest analysis for Intrepid Potash
What is Intrepid Potash worth?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Intrepid Potash’s ratio of 1.4x is trading slightly below its industry peers’ ratio of 1.92x, which means if you buy Intrepid Potash today, you’d be paying a relatively fair price for it. And if you believe Intrepid Potash should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Intrepid Potash’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of Intrepid Potash look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 revenues expected to grow by 41.23% over the next couple of years, the future seems bright for Intrepid Potash. If the level of expenses is able to be maintained, it looks like higher cash flows 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 IPI’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 IPI? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on IPI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for IPI, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Intrepid Potash. You can find everything you need to know about Intrepid Potash in the latest infographic research report. If you are no longer interested in Intrepid Potash, 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.