What Does GrafTech International Ltd.'s (NYSE:EAF) Share Price Indicate?

GrafTech International Ltd. (NYSE:EAF), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$12.14 and falling to the lows of US$9.20. 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 GrafTech International's current trading price of US$9.59 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 GrafTech International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for GrafTech International

Is GrafTech International still cheap?

Great news for investors – GrafTech International is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 GrafTech International’s ratio of 6.45x is below its peer average of 20.1x, which indicates the stock is trading at a lower price compared to the Electrical industry. Although, there may be another chance to buy again in the future. This is because GrafTech International’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of GrafTech International 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. Though in the case of GrafTech International, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although EAF is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to EAF, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on EAF for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into GrafTech International, you'd also look into what risks it is currently facing. To help with this, we've discovered 3 warning signs (1 is a bit unpleasant!) that you ought to be aware of before buying any shares in GrafTech International.

If you are no longer interested in GrafTech International, 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.