OCI NV. (ENXTAM:OCI), a chemicals company based in Netherlands, received a lot of attention from a substantial price movement on the ENXTAM in the over the last few months, increasing to €22 at one point, and dropping to the lows of €18.11. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether OCI’s current trading price of €18.88 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 OCI’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 OCI
What is OCI worth?OCI appears to be overvalued by 79% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €18.88 on the market compared to my intrinsic value of €10.55. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that OCI’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will OCI generate?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. In OCI’s case, its revenues over the next few years are expected to grow by 30.23%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? OCI’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe OCI 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 tabs on OCI for some time, 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 OCI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on OCI. You can find everything you need to know about OCI in the latest infographic research report. If you are no longer interested in OCI, you can use our free platform to see my list of over 50 other stocks with a high growth potential.