At US$35.22, Is Axalta Coating Systems Ltd. (NYSE:AXTA) Worth Looking At Closely?

While Axalta Coating Systems Ltd. (NYSE:AXTA) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$37.40 at one point, and dropping to the lows of US$33.44. 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 Axalta Coating Systems' current trading price of US$35.22 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 Axalta Coating Systems’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 Axalta Coating Systems

What's The Opportunity In Axalta Coating Systems?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio 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 25.88x is currently trading slightly below its industry peers’ ratio of 25.91x, which means if you buy Axalta Coating Systems today, you’d be paying a decent price for it. And if you believe Axalta Coating Systems 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 Axalta Coating Systems’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 does the future of Axalta Coating Systems look like?

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. With profit expected to grow by 78% over the next couple of years, the future seems bright for Axalta Coating Systems. 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 AXTA’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 track record of its management team. Have these factors changed since the last time you looked at AXTA? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on AXTA, 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 AXTA, which means it’s worth further examining other factors such as the strength of its balance sheet, 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 Axalta Coating Systems at this point in time. In terms of investment risks, we've identified 1 warning sign with Axalta Coating Systems, and understanding it should be part of your investment process.

If you are no longer interested in Axalta Coating Systems, 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.