Is There Now An Opportunity In Korea Petrochemical Ind. Co., Ltd. (KRX:006650)?

While Korea Petrochemical Ind. Co., Ltd. (KRX:006650) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the KOSE. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Korea Petrochemical Ind’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Korea Petrochemical Ind

Is Korea Petrochemical Ind still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 17.15x is currently trading slightly above its industry peers’ ratio of 15.55x, which means if you buy Korea Petrochemical Ind today, you’d be paying a relatively reasonable price for it. And if you believe that Korea Petrochemical Ind should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Korea Petrochemical Ind’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Korea Petrochemical Ind 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. Korea Petrochemical Ind'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? A006650’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 A006650? 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 A006650, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for A006650, 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 2 warning signs for Korea Petrochemical Ind and you'll want to know about them.

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This article by Simply Wall St is general in nature. 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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