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KMG Chemicals Inc (NYSE:KMG), a chemicals company based in United States, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $70.04 and falling to the lows of $56.99. 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 KMG Chemicals’s current trading price of $59.93 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 KMG Chemicals’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 KMG Chemicals
What’s the opportunity in KMG Chemicals?
According to my valuation model, KMG Chemicals seems to be fairly priced at around 8.17% below my intrinsic value, which means if you buy KMG Chemicals today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $65.26, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, it seems like KMG Chemicals’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of KMG Chemicals look like?
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. In the upcoming year, KMG Chemicals’s earnings are expected to increase by 33.95%, 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 KMG’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on KMG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.