At US$64.18, Is It Time To Put Sensient Technologies Corporation (NYSE:SXT) On Your Watch List?

Sensient Technologies Corporation (NYSE:SXT), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a US$2.7b market-cap stock, it seems odd Sensient Technologies is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Today we will analyse the most recent data on Sensient Technologies’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Sensient Technologies

Is Sensient Technologies Still Cheap?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Sensient Technologies’s ratio of 21.13x is trading in-line with its industry peers’ ratio, which means if you buy Sensient Technologies today, you’d be paying a relatively reasonable price for it. Furthermore, it seems like Sensient Technologies’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Sensient Technologies?

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. Sensient Technologies' earnings over the next few years are expected to increase by 37%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in SXT’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at SXT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SXT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for SXT, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Sensient Technologies, you'd also look into what risks it is currently facing. For example, we've found that Sensient Technologies has 2 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Sensient Technologies, 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.