Is It Too Late To Consider Buying Solvay SA (EBR:SOLB)?

While Solvay SA (EBR:SOLB) might not have the largest market cap around , it led the ENXTBR gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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 Solvay’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Solvay

Is Solvay Still Cheap?

Great news for investors – Solvay is still trading at a fairly cheap price. According to our valuation, the intrinsic value for the stock is €51.57, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Another thing to keep in mind is that Solvay’s share price may be quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Solvay?

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 expected decline of -14% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Solvay. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although SOLB is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. We recommend you think about whether you want to increase your portfolio exposure to SOLB, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on SOLB for a while, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing Solvay at this point in time. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Solvay.

If you are no longer interested in Solvay, 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.