What Does Orion Engineered Carbons S.A.'s (NYSE:OEC) Share Price Indicate?

Orion Engineered Carbons S.A. (NYSE:OEC), is not the largest company out there, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the 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 take a look at Orion Engineered Carbons’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Orion Engineered Carbons

What Is Orion Engineered Carbons Worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Orion Engineered Carbons’s ratio of 14.06x is trading slightly above its industry peers’ ratio of 12.1x, which means if you buy Orion Engineered Carbons today, you’d be paying a relatively reasonable price for it. And if you believe that Orion Engineered Carbons 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 Orion Engineered Carbons’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.

What kind of growth will Orion Engineered Carbons generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 79% over the next couple of years, the future seems bright for Orion Engineered Carbons. 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 already priced in OEC’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 OEC? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on OEC, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for OEC, 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.

If you'd like to know more about Orion Engineered Carbons as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Orion Engineered Carbons you should be mindful of and 2 of these are a bit concerning.

If you are no longer interested in Orion Engineered Carbons, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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