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

Evonik Industries AG (ETR:EVK), is not the largest company out there, but it received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €19.87 at one point, and dropping to the lows of €17.03. 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 €18.56 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 Evonik Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out the opportunities and risks within the DE Chemicals industry.

Is Evonik Industries 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 9.34x is currently trading slightly above its industry peers’ ratio of 8.86x, which means if you buy Evonik Industries today, you’d be paying a relatively reasonable price for it. And if you believe Evonik Industries should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Evonik Industries’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Evonik Industries look like?

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. Evonik Industries' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? EVK’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at EVK? 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 EVK, 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 EVK, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 1 warning sign for Evonik Industries you should know about.

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.

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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.