In This Article:
Stepan Company (NYSE:SCL), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$81.08 and falling to the lows of US$70.64. 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 Stepan's current trading price of US$74.74 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Stepan’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Stepan
What Is Stepan Worth?
According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. We’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 36.69x is currently well-above the industry average of 23.57x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Stepan’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 Stepan generate?
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. With profit expected to grow by 74% over the next year, the near-term future seems bright for Stepan. 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 SCL’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SCL 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.