Johnson Matthey Plc (LSE:JMAT), a chemicals company based in United Kingdom, received a lot of attention from a substantial price movement on the LSE in the over the last few months, increasing to £35.03 at one point, and dropping to the lows of £29.68. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Johnson Matthey’s current trading price of £32.09 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 is currently trading at £32.09 on the share market, which means it is overvalued by 56% compared to my intrinsic value of £20.58. Not the best news for investors looking to buy! In addition to this, it seems like Johnson Matthey’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Johnson Matthey generate?
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. Johnson Matthey’s earnings over the next few years are expected to increase by 28.01%, 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? Johnson Matthey’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe Johnson Matthey 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 Johnson Matthey 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 positive outlook is encouraging for Johnson Matthey, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.