Let's talk about the popular Air Products and Chemicals, Inc. (NYSE:APD). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$338 at one point, and dropping to the lows of US$249. 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 Air Products and Chemicals' current trading price of US$269 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 Air Products and Chemicals’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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What's The Opportunity In Air Products and Chemicals?

The share price seems sensible at the moment 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 15.54x is currently trading slightly below its industry peers’ ratio of 18.15x, which means if you buy Air Products and Chemicals today, you’d be paying a decent price for it. And if you believe Air Products and Chemicals should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, Air Products and Chemicals’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

See our latest analysis for Air Products and Chemicals

What kind of growth will Air Products and Chemicals generate?

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. However, with a negative profit growth of -3.8% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Air Products and Chemicals. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? APD seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on APD, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on APD for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on APD should the price fluctuate below the industry PE ratio.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 4 warning signs for Air Products and Chemicals (1 is significant!) that we believe deserve your full attention.

If you are no longer interested in Air Products and Chemicals, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.