- Oops!Something went wrong.Please try again later.
Air Products and Chemicals, Inc. (NYSE:APD) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$263 at one point, and dropping to the lows of US$218. 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 Air Products and Chemicals' current trading price of US$234 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 Air Products and Chemicals’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Air Products and Chemicals still cheap?
Air Products and Chemicals appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 23.83x is currently well-above the industry average of 16.96x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Air Products and Chemicals’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.
Can we expect growth from Air Products and Chemicals?
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. Air Products and Chemicals' earnings over the next few years are expected to increase by 34%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in APD’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe APD 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 APD 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 outlook is encouraging for APD, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Air Products and Chemicals, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Air Products and Chemicals and we think they deserve your attention.
If you are no longer interested in Air Products and Chemicals, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.