Sasha Jovanovic
4 min read
Wacker Chemie has seen a mixed share price story in recent years, and that leaves a clear question for you as an investor: is the current valuation supported by the sales the business is generating? With the stock recently closing at €79.40 and a long stretch of ups and downs behind it, the focus naturally shifts to what that tag implies about the strength and pricing of its revenue base.
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Over the past 5 years the share price has fallen 42.4%, which puts the spotlight on whether today’s valuation can still be explained by the revenue stream the company produces.
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Recent company news highlighted higher profit expectations supported by cost savings and contract effects, which can reshape how investors think about the relationship between current sales, profitability and what multiple the market may be willing to pay for that turnover.
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Your read on Wacker Chemie is one view; the desks covering it have another. See what analysts think Wacker Chemie’s shares could be worth.
The issue now is whether the current share price of Wacker Chemie is adequately supported by its sales when measured against the Fair Ratio benchmark.
If you are weighing Wacker Chemie against other opportunities that link share prices to sales strength, it can help to compare it with companies from the 220 high quality undervalued stocks.
Does Wacker Chemie Look Pricey on Sales?
Price to sales works well for Wacker Chemie because investors are weighing the revenue base of its chemicals operations against what the market is willing to pay per euro of turnover. On this metric, the stock trades on a P/S of about 0.7x, compared with an industry average of roughly 1.2x and a peer group closer to 1.7x, so the market is currently attaching a lower revenue multiple to Wacker Chemie than to many comparable businesses.
Recent guidance that points to higher EBITDA because of cost savings and contract effects has not pushed the P/S ratio up to those wider sector levels. This leaves the focus squarely on how durable that earnings support is against the existing sales base. The Fair Ratio model, which looks at Wacker Chemie’s own growth profile, margins, scale and risk, suggests the present 0.7x sits above the multiple that would typically be expected for this business, so on this framework the shares screen as overvalued on sales. To see how that Fair Ratio and the gap to today’s market price are calculated in detail, you can continue with the valuation lens here. Explore the numbers behind Wacker Chemie’s P/S valuation.
