Is Quaker Chemical Corporation (NYSE:KWR) Potentially Undervalued?

While Quaker Chemical Corporation (NYSE:KWR) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$262 at one point, and dropping to the lows of US$232. 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 Quaker Chemical's current trading price of US$246 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 Quaker Chemical’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 Quaker Chemical

What is Quaker Chemical worth?

Quaker Chemical appears to be overvalued by 36% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$246 on the market compared to my intrinsic value of $181.19. This means that the opportunity to buy Quaker Chemical at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Quaker Chemical’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Quaker Chemical 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. 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 grow by 59% over the next couple of years, the future seems bright for Quaker Chemical. 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 well and truly priced in KWR’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe KWR should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 KWR for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for KWR, which means it’s worth diving deeper into other factors 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. To that end, you should learn about the 2 warning signs we've spotted with Quaker Chemical (including 1 which is a bit unpleasant).

If you are no longer interested in Quaker Chemical, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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.

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