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Evonik Industries AG (FRA:EVK) saw a double-digit share price rise of over 10% in the past couple of months on the DB. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Evonik Industries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Evonik Industries
What is Evonik Industries worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 11.08% above my intrinsic value, which means if you buy Evonik Industries today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth €22.52, there’s only an insignificant downside when the price falls to its real value. Furthermore, Evonik Industries’s low beta implies that the stock is less volatile than the wider market.
What does the future of Evonik Industries look like?
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. 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. However, with a negative profit growth of -2.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Evonik Industries. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, EVK appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on EVK for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on EVK should the price fluctuate below its true value.