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

Umicore SA (EBR:UMI), is not the largest company out there, but it saw significant share price movement during recent months on the ENXTBR, rising to highs of €27.93 and falling to the lows of €22.94. 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 €22.94 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.

View our latest analysis for Umicore

Is Umicore Still Cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 11.39x is currently trading in-line with its industry peers’ ratio, which means if you buy Umicore today, you’d be paying a relatively reasonable price for it. Although, there may be an opportunity to buy in the future. This is because Umicore’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Umicore generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Umicore, it is expected to deliver a negative earnings growth of -2.0%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? UMI seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on UMI, 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 most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on UMI should the price fluctuate below the industry PE ratio.

If you'd like to know more about Umicore as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Umicore you should be aware of.

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.