Elementis plc (LON:ELM), which is in the chemicals business, and is based in United Kingdom, received a lot of attention from a substantial price increase on the LSE over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Elementis’s outlook and valuation to see if the opportunity still exists.
What's the opportunity in Elementis?
Great news for investors – Elementis is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is £1.04, but it is currently trading at UK£0.60 on the share market, meaning that there is still an opportunity to buy now. However, given that Elementis’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 does the future of Elementis look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 33% over the next couple of years, the future seems bright for Elementis. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since ELM is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on ELM for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ELM. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Elementis. You can find everything you need to know about Elementis in the latest infographic research report. If you are no longer interested in Elementis, you can use our free platform to see my 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. 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. Thank you for reading.