Yahoo Finance Is It The Right Time To Buy Orica Limited (ASX:ORI)?
Orica Limited (ASX:ORI), a chemicals company based in Australia, saw significant share price volatility over the past couple of months on the ASX, rising to the highs of A$20.29 and falling to the lows of A$17.51. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Orica’s current trading price of A$17.51 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Orica’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Orica
What is Orica worth?
Orica appears to be overvalued by 50% at the moment, based on my discounted cash flow valuation. The stock is currently priced at AU$17.51 on the market compared to my intrinsic value of A$11.65. Not the best news for investors looking to buy! Furthermore, Orica’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What does the future of Orica look like?
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 revenues expected to grow by a double-digit 17.11% over the next couple of years, the outlook is positive for Orica. If the level of expenses is able to be maintained, it looks like higher cash flows 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 ORI’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ORI should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ORI for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for ORI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Orica. You can find everything you need to know about Orica in the latest infographic research report. If you are no longer interested in Orica, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
