Today we're going to take a look at the well-established IMCD N.V. (AMS:IMCD). The company's stock received a lot of attention from a substantial price increase on the ENXTAM over the last few months. As a large-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 IMCD’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in IMCD?
IMCD appears to be overvalued by 39% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €186 on the market compared to my intrinsic value of €133.36. This means that the opportunity to buy IMCD at a good price has disappeared! Furthermore, IMCD’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from IMCD?
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. With profit expected to grow by 46% over the next couple of years, the future seems bright for IMCD. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in IMCD’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe IMCD should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on IMCD for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for IMCD, which means it’s worth diving deeper into other factors 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. In terms of investment risks, we've identified 2 warning signs with IMCD, and understanding these should be part of your investment process.
If you are no longer interested in IMCD, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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.
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