Let's talk about the popular Sociedad Química y Minera de Chile S.A. (NYSE:SQM). The company's shares saw a decent share price growth in the teens level on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Sociedad Química y Minera de Chile’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is Sociedad Química y Minera de Chile still cheap?
Sociedad Química y Minera de Chile appears to be overvalued by 29% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$47.41 on the market compared to my intrinsic value of $36.66. Not the best news for investors looking to buy! In addition to this, it seems like Sociedad Química y Minera de Chile’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Sociedad Química y Minera de Chile generate?
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 more than double over the next couple of years, the future seems bright for Sociedad Química y Minera de Chile. 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? SQM’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe SQM 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 SQM 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 SQM, 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 Sociedad Química y Minera de Chile, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Sociedad Química y Minera de Chile and we think they deserve your attention.
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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.
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