Should You Investigate Sociedad Química y Minera de Chile S.A. (NYSE:SQM) At US$74.53?

Sociedad Química y Minera de Chile S.A. (NYSE:SQM) saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? 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.

See our latest analysis for Sociedad Química y Minera de Chile

What's The Opportunity In Sociedad Química y Minera de Chile?

Good news, investors! Sociedad Química y Minera de Chile is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 5.52x is currently well-below the industry average of 14.24x, meaning that it is trading at a cheaper price relative to its peers. However, given that Sociedad Química y Minera de Chile’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

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. Though in the case of Sociedad Química y Minera de Chile, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although SQM is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to SQM, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on SQM for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into Sociedad Química y Minera de Chile, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for Sociedad Química y Minera de Chile (of which 2 don't sit too well with us!) you should know about.

If you are no longer interested in Sociedad Química y Minera de Chile, 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.