At €75.00, Is It Time To Put Arkema S.A. (EPA:AKE) On Your Watch List?

Arkema S.A. (EPA:AKE), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the ENXTPA over the last few months, increasing to €88.10 at one point, and dropping to the lows of €73.95. 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 Arkema's current trading price of €75.00 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 Arkema’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Arkema

What Is Arkema Worth?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 16.38x is currently trading slightly below its industry peers’ ratio of 19.76x, which means if you buy Arkema today, you’d be paying a decent price for it. And if you believe that Arkema should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Arkema’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 Arkema look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Arkema'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? AKE’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 AKE? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on AKE, 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 AKE, 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.

Diving deeper into the forecasts for Arkema mentioned earlier will help you understand how analysts view the stock going forward. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Arkema, 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.