Is It Too Late To Consider Buying Valvoline Inc. (NYSE:VVV)?

Valvoline Inc. (NYSE:VVV), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$43.41 at one point, and dropping to the lows of US$36.27. 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 Valvoline's current trading price of US$36.82 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Valvoline’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Valvoline

Is Valvoline Still Cheap?

Valvoline 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 Valvoline’s ratio of 22.04x is above its peer average of 16.38x, which suggests the stock is trading at a higher price compared to the Specialty Retail industry. But, is there another opportunity to buy low in the future? Given that Valvoline’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 Valvoline generate?

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. However, with a relatively muted profit growth of 9.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Valvoline, at least in the short term.

What This Means For You

Are you a shareholder? VVV’s 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 VVV 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 VVV 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 positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Valvoline and we think they deserve your attention.

If you are no longer interested in Valvoline, 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.