Why AdvanSix Inc. (NYSE:ASIX) Could Be Worth Watching

AdvanSix Inc. (NYSE:ASIX), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. The company is now trading at yearly-high levels following the recent surge in its share price. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today we will analyse the most recent data on AdvanSix’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for AdvanSix

What Is AdvanSix Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that AdvanSix’s ratio of 21.89x is trading slightly below its industry peers’ ratio of 26.28x, which means if you buy AdvanSix today, you’d be paying a decent price for it. And if you believe AdvanSix should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that AdvanSix’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.

Can we expect growth from AdvanSix?

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. 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. With profit expected to more than double in the upcoming, the future appears to be extremely bright for AdvanSix. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in ASIX’s positive outlook, with shares trading around industry price multiples. 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 ASIX? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on ASIX, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ASIX, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that AdvanSix has 2 warning signs and it would be unwise to ignore them.

If you are no longer interested in AdvanSix, 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.