Innophos Holdings Inc (NASDAQ:IPHS), which is in the chemicals business, and is based in United States, saw significant share price volatility over the past couple of months on the NasdaqGS, rising to the highs of $45.85 and falling to the lows of $25.52. 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 Innophos Holdings’s current trading price of $25.52 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Innophos Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Innophos Holdings worth?
According to my relative valuation model, the stock is currently overvalued. 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 Innophos Holdings’s ratio of 24.96x is above its peer average of 18.89x, which suggests the stock is overvalued compared to the Chemicals industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Innophos Holdings’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.
What kind of growth will Innophos Holdings generate?
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 profit expected to more than double in the upcoming, the future appears to be extremely bright for Innophos Holdings. 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? IPHS’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe IPHS 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. 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 tabs on IPHS for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for IPHS, which means it’s worth diving deeper into other factors 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 Innophos Holdings. You can find everything you need to know about Innophos Holdings in the latest infographic research report. If you are no longer interested in Innophos Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.