In This Article:
Johnson Matthey Plc (LON:JMAT), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the LSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Johnson Matthey’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Johnson Matthey
What is Johnson Matthey worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 4.00% above my intrinsic value, which means if you buy Johnson Matthey today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth £30.22, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Johnson Matthey’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.
Can we expect growth from Johnson Matthey?
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. Johnson Matthey's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 JMAT’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on JMAT, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.