While OC Oerlikon Corporation AG (VTX:OERL) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the SWX over the last few months, increasing to CHF9.07 at one point, and dropping to the lows of CHF6.76. 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 OC Oerlikon's current trading price of CHF7.24 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 OC Oerlikon’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is OC Oerlikon still cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 OC Oerlikon’s ratio of 14.96x is trading slightly below its industry peers’ ratio of 18.35x, which means if you buy OC Oerlikon today, you’d be paying a decent price for it. And if you believe OC Oerlikon should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that OC Oerlikon’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will OC Oerlikon 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. OC Oerlikon's earnings over the next few years are expected to increase by 42%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in OERL’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at OERL? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on OERL, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for OERL, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into OC Oerlikon, you'd also look into what risks it is currently facing. While conducting our analysis, we found that OC Oerlikon has 1 warning sign and it would be unwise to ignore this.
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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.