What Is Air Products and Chemicals, Inc.'s (NYSE:APD) Share Price Doing?

Today we're going to take a look at the well-established Air Products and Chemicals, Inc. (NYSE:APD). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$274 at one point, and dropping to the lows of US$222. 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 Air Products and Chemicals' current trading price of US$232 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 Air Products and Chemicals’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out the opportunities and risks within the US Chemicals industry.

Is Air Products and Chemicals Still Cheap?

Air Products and Chemicals appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 23.1x is currently well-above the industry average of 13.91x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Air Products and Chemicals’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 levels around its industry peers, 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.

What kind of growth will Air Products and Chemicals 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. Air Products and Chemicals' earnings over the next few years are expected to increase by 33%, 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? APD’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe APD should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 APD for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for APD, which means it’s worth diving deeper into other factors 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. At Simply Wall St, we found 1 warning sign for Air Products and Chemicals and we think they deserve your attention.

If you are no longer interested in Air Products and Chemicals, 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.