What Does Wacker Chemie AG's (ETR:WCH) Share Price Indicate?

While Wacker Chemie AG (ETR:WCH) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the XTRA, rising to highs of €150 and falling to the lows of €116. 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 Wacker Chemie's current trading price of €120 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 Wacker Chemie’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 Wacker Chemie

Is Wacker Chemie Still Cheap?

Great news for investors – Wacker Chemie is still trading at a fairly cheap price 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 Wacker Chemie’s ratio of 5.96x is below its peer average of 11.82x, which indicates the stock is trading at a lower price compared to the Chemicals industry. Although, there may be another chance to buy again in the future. This is because Wacker Chemie’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 does the future of Wacker Chemie look like?

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. Though in the case of Wacker Chemie, it is expected to deliver a highly negative earnings growth in the next few years, 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? Although WCH is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to WCH, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on WCH for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Wacker Chemie as a business, it's important to be aware of any risks it's facing. When we did our research, we found 2 warning signs for Wacker Chemie (1 doesn't sit too well with us!) that we believe deserve your full attention.

If you are no longer interested in Wacker Chemie, 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.