Is Innospec Inc. (NASDAQ:IOSP) Potentially Undervalued?

Innospec Inc. (NASDAQ:IOSP), might not be a large cap stock, but it saw a decent share price growth of 13% on the NASDAQGS over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. As a well-established company, which tends to be well-covered by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Innospec’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Innospec

Is Innospec Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 11% below our intrinsic value, which means if you buy Innospec today, you’d be paying a fair price for it. And if you believe that the stock is really worth $145.95, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Innospec’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Innospec generate?

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. Innospec's earnings over the next few years are expected to increase by 25%, 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 IOSP’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on IOSP, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Innospec has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Innospec, 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.