PPG Industries, Inc. (NYSE:PPG) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$173 at one point, and dropping to the lows of US$153. 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 PPG Industries' current trading price of US$154 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at PPG Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is PPG Industries still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17% below my intrinsic value, which means if you buy PPG Industries today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $185.89, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since PPG Industries’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 kind of growth will PPG Industries generate?
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 48% over the next couple of years, the future seems bright for PPG Industries. 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 PPG’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on PPG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 PPG Industries at this point in time. You'd be interested to know, that we found 1 warning sign for PPG Industries and you'll want to know about it.
If you are no longer interested in PPG Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Valuation is complex, but we're helping make it simple.
Find out whether PPG Industries is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.