What Does Ingevity Corporation's (NYSE:NGVT) Share Price Indicate?

Ingevity Corporation (NYSE:NGVT), might not be a large cap stock, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Ingevity’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Ingevity

What's the opportunity in Ingevity?

According to my 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. 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 20.25x is currently trading slightly above its industry peers’ ratio of 16.95x, which means if you buy Ingevity today, you’d be paying a relatively sensible price for it. And if you believe Ingevity should be trading in this range, then there isn’t really any room for the share price 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 Ingevity’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 Ingevity look like?

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. With profit expected to grow by 98% over the next couple of years, the future seems bright for Ingevity. 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? NGVT’s optimistic future growth appears to have been factored into the current share price, 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 NGVT? 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 tabs on NGVT, 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 NGVT, 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.

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. For example - Ingevity has 3 warning signs we think you should be aware of.

If you are no longer interested in Ingevity, 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.