When Should You Buy Sociedad Química y Minera de Chile S.A. (NYSE:SQM)?

Let's talk about the popular Sociedad Química y Minera de Chile S.A. (NYSE:SQM). The company's shares saw significant share price movement during recent months on the NYSE, rising to highs of US$111 and falling to the lows of US$82.15. 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 Sociedad Química y Minera de Chile's current trading price of US$82.15 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 Sociedad Química y Minera de Chile’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 Sociedad Química y Minera de Chile

Is Sociedad Química y Minera de Chile Still Cheap?

Great news for investors – Sociedad Química y Minera de Chile is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to 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 Sociedad Química y Minera de Chile’s ratio of 7.63x is below its peer average of 14.09x, which indicates the stock is trading at a lower price compared to the Chemicals industry. Sociedad Química y Minera de Chile’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Sociedad Química y Minera de Chile?

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 negative earnings growth of -0.9%, 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. Consider 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 tabs on SQM for some time, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Sociedad Química y Minera de Chile is showing 2 warning signs in our investment analysis and 1 of those can't be ignored...

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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.