At US$20.82, Is Avantor, Inc. (NYSE:AVTR) Worth Looking At Closely?

Today we're going to take a look at the well-established Avantor, Inc. (NYSE:AVTR). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$25.86 at one point, and dropping to the lows of US$20.58. 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 Avantor's current trading price of US$20.82 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 Avantor’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Avantor

Is Avantor Still Cheap?

Avantor appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. 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 Avantor’s ratio of 54.39x is above its peer average of 41x, which suggests the stock is trading at a higher price compared to the Life Sciences industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Avantor’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 Avantor 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. Avantor's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? AVTR’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe AVTR should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 tabs on AVTR for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for AVTR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Avantor as a business, it's important to be aware of any risks it's facing. Be aware that Avantor is showing 3 warning signs in our investment analysis and 1 of those shouldn't be ignored...

If you are no longer interested in Avantor, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com