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Today we're going to take a look at the well-established Eastman Chemical Company (NYSE:EMN). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$114 at one point, and dropping to the lows of US$97.17. 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 Eastman Chemical's current trading price of US$102 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 Eastman Chemical’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 Eastman Chemical
What Is Eastman Chemical Worth?
Great news for investors – Eastman Chemical is still trading at a fairly cheap price 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 13.29x is currently well-below the industry average of 22.46x, meaning that it is trading at a cheaper price relative to its peers. However, given that Eastman Chemical’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Eastman Chemical 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. With profit expected to grow by 29% over the next couple of years, the future seems bright for Eastman Chemical. 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? Since EMN is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.