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Is Now The Time To Look At Buying Johnson Matthey Plc (LON:JMAT)?

Simply Wall St

Johnson Matthey Plc (LON:JMAT), which is in the chemicals business, and is based in United Kingdom, saw significant share price movement during recent months on the LSE, rising to highs of UK£32.71 and falling to the lows of UK£26.05. 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 Johnson Matthey's current trading price of UK£26.62 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 Johnson Matthey’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 Johnson Matthey

Is Johnson Matthey still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.95% above my intrinsic value, which means if you buy Johnson Matthey today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is £24.21, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Johnson Matthey’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Johnson Matthey generate?

LSE:JMAT Past and Future Earnings, February 11th 2020

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. With profit expected to grow by 34% over the next couple of years, the future seems bright for Johnson Matthey. 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? It seems like the market has already priced in JMAT’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on JMAT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Johnson Matthey. You can find everything you need to know about Johnson Matthey in the latest infographic research report. If you are no longer interested in Johnson Matthey, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.