Should You Think About Buying Compagnie Plastic Omnium SE (EPA:POM) Now?

While Compagnie Plastic Omnium SE (EPA:POM) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the ENXTPA. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Compagnie Plastic Omnium’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Compagnie Plastic Omnium

What's The Opportunity In Compagnie Plastic Omnium?

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. 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 Compagnie Plastic Omnium’s ratio of 24.66x is trading slightly above its industry peers’ ratio of 22.02x, which means if you buy Compagnie Plastic Omnium today, you’d be paying a relatively sensible price for it. And if you believe Compagnie Plastic Omnium 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 Compagnie Plastic Omnium’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 kind of growth will Compagnie Plastic Omnium 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. Compagnie Plastic Omnium's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? POM’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 financial strength of the company. Have these factors changed since the last time you looked at POM? 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 an eye on POM, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for POM, 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.

So while earnings quality is important, it's equally important to consider the risks facing Compagnie Plastic Omnium at this point in time. While conducting our analysis, we found that Compagnie Plastic Omnium has 3 warning signs and it would be unwise to ignore these.

If you are no longer interested in Compagnie Plastic Omnium, 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.