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Today we're going to take a look at the well-established Sociedad Química y Minera de Chile S.A. (NYSE:SQM). The company's stock saw a significant share price rise of over 20% in the past couple of months on the NYSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Sociedad Química y Minera de Chile’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in Sociedad Química y Minera de Chile?
Sociedad Química y Minera de Chile appears to be overvalued by 39% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$55.63 on the market compared to my intrinsic value of $39.89. This means that the opportunity to buy Sociedad Química y Minera de Chile at a good price has disappeared! Furthermore, Sociedad Química y Minera de Chile’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Sociedad Química y Minera de Chile?
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 more than double over the next couple of years, the future seems bright for Sociedad Química y Minera de Chile. 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 well and truly priced in SQM’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe SQM should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 SQM for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for SQM, 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 Sociedad Química y Minera de Chile as a business, it's important to be aware of any risks it's facing. For example, we've found that Sociedad Química y Minera de Chile has 3 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Sociedad Química y Minera de Chile, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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.
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