What Is Evonik Industries AG's (ETR:EVK) Share Price Doing?

Evonik Industries AG (ETR:EVK) received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €29.75 at one point, and dropping to the lows of €26.67. 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 Evonik Industries' current trading price of €28.11 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 Evonik Industries’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 Evonik Industries

What's the opportunity in Evonik Industries?

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. 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 20.4x is currently well-above the industry average of 13.2x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Evonik 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 kind of growth will Evonik Industries generate?

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. 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. Evonik Industries' earnings over the next few years are expected to increase by 74%, 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 well and truly priced in EVK’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe EVK 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. 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 tabs on EVK for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for EVK, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Evonik Industries 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 Evonik Industries you should be aware of.

If you are no longer interested in Evonik Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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.

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