U.S. Markets close in 2 hrs 30 mins
  • S&P 500

    3,672.69
    +3.68 (+0.10%)
     
  • Dow 30

    30,027.67
    +143.88 (+0.48%)
     
  • Nasdaq

    12,407.60
    +58.23 (+0.47%)
     
  • Russell 2000

    1,858.26
    +20.24 (+1.10%)
     
  • Crude Oil

    45.72
    +0.44 (+0.97%)
     
  • Gold

    1,841.00
    +10.80 (+0.59%)
     
  • Silver

    24.13
    +0.05 (+0.21%)
     
  • EUR/USD

    1.2142
    +0.0026 (+0.2186%)
     
  • 10-Yr Bond

    0.9210
    -0.0270 (-2.85%)
     
  • Vix

    21.11
    -0.06 (-0.28%)
     
  • GBP/USD

    1.3474
    +0.0098 (+0.7343%)
     
  • USD/JPY

    103.9280
    -0.4960 (-0.4750%)
     
  • BTC-USD

    19,377.52
    +428.62 (+2.26%)
     
  • CMC Crypto 200

    380.89
    +6.48 (+1.73%)
     
  • FTSE 100

    6,490.27
    +26.88 (+0.42%)
     
  • Nikkei 225

    26,809.37
    +8.39 (+0.03%)
     

At US$12.75, Is It Time To Put Element Solutions Inc (NYSE:ESI) On Your Watch List?

Simply Wall St
·4 min read

While Element Solutions Inc (NYSE:ESI) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NYSE over the last few months. As a mid-cap 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 take a look at Element Solutions’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Element Solutions

What's the opportunity in Element Solutions?

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. 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 26.27x is currently trading slightly below its industry peers’ ratio of 27.45x, which means if you buy Element Solutions today, you’d be paying a reasonable price for it. And if you believe that Element Solutions should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Element Solutions’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.

What kind of growth will Element Solutions generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Element Solutions' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? ESI’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 financial strength of the company. Have these factors changed since the last time you looked at ESI? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on ESI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ESI, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 2 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in Element Solutions.

If you are no longer interested in Element Solutions, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.