Is There Now An Opportunity In Akzo Nobel N.V. (AMS:AKZA)?

Let's talk about the popular Akzo Nobel N.V. (AMS:AKZA). The company's shares received a lot of attention from a substantial price movement on the ENXTAM over the last few months, increasing to €83.88 at one point, and dropping to the lows of €61.20. 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 Akzo Nobel's current trading price of €63.38 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Akzo Nobel’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 Akzo Nobel

Is Akzo Nobel still cheap?

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 Akzo Nobel’s ratio of 14.78x is trading slightly above its industry peers’ ratio of 14x, which means if you buy Akzo Nobel today, you’d be paying a relatively reasonable price for it. And if you believe Akzo Nobel 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. In addition to this, it seems like Akzo Nobel’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 Akzo Nobel 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. Akzo Nobel's earnings over the next few years are expected to increase by 40%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in AKZA’s positive outlook, 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 AKZA? 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 tabs on AKZA, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for AKZA, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Akzo Nobel has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you are no longer interested in Akzo Nobel, 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.