Is Orion Engineered Carbons S.A. (NYSE:OEC) Potentially Undervalued?

Orion Engineered Carbons S.A. (NYSE:OEC), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$22.20 and falling to the lows of US$18.27. 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$18.27 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.

View our latest analysis for Orion Engineered Carbons

What is Orion Engineered Carbons worth?

Orion Engineered Carbons appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. 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 46.73x is above its peer average of 25.72x, which suggests the stock is trading at a higher price compared to the Chemicals industry. But, is there another opportunity to buy low in the future? Since Orion Engineered Carbons’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Orion Engineered Carbons look like?

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 more than double in the upcoming, the future appears to be extremely 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 well and truly priced in OEC’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe OEC should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 tabs on OEC for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for OEC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Orion Engineered Carbons, you'd also look into what risks it is currently facing. To that end, you should learn about the 2 warning signs we've spotted with Orion Engineered Carbons (including 1 which is potentially serious).

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.

If you decide to trade Orion Engineered Carbons, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.