Element Solutions Inc (NYSE:ESI), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NYSE. 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, could the stock still be trading at a relatively cheap price? Let’s examine Element Solutions’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What Is Element Solutions Worth?
Good news, investors! Element Solutions is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $28.97, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Element Solutions’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Element Solutions generate?
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. With profit expected to grow by 98% over the next couple of years, the future seems bright for Element Solutions. 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? Since ESI is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on ESI for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ESI. 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 buy.
If you want to dive deeper into Element Solutions, you'd also look into what risks it is currently facing. For example, Element Solutions has 3 warning signs (and 1 which is concerning) we think you should know about.
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.
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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.
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