Is There Now An Opportunity In Umicore SA (EBR:UMI)?

While Umicore SA (EBR:UMI) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the ENXTBR over the last few months, increasing to €42.16 at one point, and dropping to the lows of €35.26. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Umicore's current trading price of €38.03 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Umicore’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Umicore

What's the opportunity in Umicore?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Umicore’s ratio of 14.75x is above its peer average of 7.03x, which suggests the stock is trading at a higher price compared to the Chemicals industry. But, is there another opportunity to buy low in the future? Given that Umicore’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.

Can we expect growth from Umicore?

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. 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. However, with a negative profit growth of -17% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Umicore. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? If you believe UMI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. 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 UMI for a while, now may not be the best time to enter into the stock. The price has climbed past its industry peers, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 2 warning signs for Umicore (1 is a bit concerning) you should be familiar with.

If you are no longer interested in Umicore, 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.