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While Methanex Corporation (TSE:MX) might not have the largest market cap around , it saw significant share price movement during recent months on the TSX, rising to highs of CA$76.75 and falling to the lows of CA$36.82. 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 Methanex's current trading price of CA$38.06 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 Methanex’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Methanex Worth?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 11.31x is currently trading slightly above its industry peers’ ratio of 9.84x, which means if you buy Methanex today, you’d be paying a relatively sensible price for it. And if you believe that Methanex should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Methanex’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
View our latest analysis for Methanex
Can we expect growth from Methanex?
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. Methanex's earnings over the next few years are expected to increase by 95%, 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 already priced in MX’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MX? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?