Is It Too Late To Consider Buying Orion Engineered Carbons S.A. (NYSE:OEC)?

Orion Engineered Carbons S.A. (NYSE:OEC), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$17.73 at one point, and dropping to the lows of US$13.35. 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 Orion Engineered Carbons' current trading price of US$13.35 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Orion Engineered Carbons’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 Orion Engineered Carbons

Is Orion Engineered Carbons Still Cheap?

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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Orion Engineered Carbons’s ratio of 9.63x is trading slightly below its industry peers’ ratio of 13.85x, which means if you buy Orion Engineered Carbons today, you’d be paying a reasonable price for it. And if you believe that Orion Engineered Carbons should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Orion Engineered Carbons’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Orion Engineered Carbons?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 46% over the next year, the near-term future seems bright for Orion Engineered Carbons. 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 OEC’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 OEC? 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 OEC, 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 OEC, 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.

So while earnings quality is important, it's equally important to consider the risks facing Orion Engineered Carbons at this point in time. To that end, you should learn about the 3 warning signs we've spotted with Orion Engineered Carbons (including 2 which are a bit unpleasant).

If you are no longer interested in Orion Engineered Carbons, 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.