Why Air Products and Chemicals, Inc. (NYSE:APD) Could Be Worth Watching

Air Products and Chemicals, Inc. (NYSE:APD) saw significant share price movement during recent months on the NYSE, rising to highs of US$293 and falling to the lows of US$254. 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$270 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 our latest analysis for Air Products and Chemicals

Is Air Products and Chemicals Still Cheap?

Air Products and Chemicals is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’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 26.18x is currently well-above the industry average of 20.8x, 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.

Can we expect growth from Air Products and Chemicals?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Air Products and Chemicals' earnings over the next few years are expected to increase by 66%, 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 well and truly priced in APD’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to 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 positive outlook 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 while earnings quality is important, it's equally important to consider the risks facing Air Products and Chemicals at this point in time. At Simply Wall St, we found 2 warning signs 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.