Today we’re going to take a look at the well-established LyondellBasell Industries NV (NYSE:LYB). The company’s stock saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $115.95 and falling to the lows of $86.57. 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 LyondellBasell Industries’s current trading price of $92.78 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at LyondellBasell Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in LyondellBasell Industries?
According to my valuation model, the stock is currently overvalued by about 28.61%, trading at US$92.78 compared to my intrinsic value of $72.14. This means that the opportunity to buy LyondellBasell Industries at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that LyondellBasell Industries’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 does the future of LyondellBasell Industries look like?
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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for LyondellBasell Industries, at least in the near future.
What this means for you:
Are you a shareholder? If you believe LYB is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. 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 an eye on LYB for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on LyondellBasell Industries. You can find everything you need to know about LyondellBasell Industries in the latest infographic research report. If you are no longer interested in LyondellBasell Industries, 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.