The European Commission’s conditional approval of Baker Hughes’ proposed $13.6 billion acquisition of Chart Industries (GTLS) puts the stock in focus, as investors weigh the implications of required LNG-related divestments.

Over the past year, Chart Industries’ total shareholder return of 27.3% compares with relatively modest recent share price moves. This suggests the Baker Hughes deal and LNG divestment conditions are now the main drivers of how investors are reassessing both growth prospects and risk.

If this kind of deal driven story has your attention, it can be useful to widen the lens and look at other infrastructure and equipment suppliers through our 34 power grid technology and infrastructure stocks

With Chart Industries trading around $209.91 after a 27.3% one year total return and a pending Baker Hughes deal on the table, does it make more sense to commit capital now, or to wait for a cleaner entry after divestment terms settle and pricing adjusts?

Preferred Price-To-Sales Multiple of 2.4x: Is It Justified?

With Chart Industries trading at $209.91 and a Price-To-Sales (P/S) ratio of 2.4x, the stock is described as expensive relative to both its own fair P/S estimate and the broader US Machinery industry, even though it sits below the peer average.

The P/S ratio compares the company’s market value to its revenue, which can be useful for businesses like Chart Industries that are currently loss making and where earnings based ratios such as P/E are less informative. In this case, investors are effectively paying 2.4 times the company’s annual sales for exposure to its cryogenic equipment, LNG infrastructure and broader industrial gas and hydrogen solutions.

Simply Wall St’s model suggests a fair P/S ratio of 1.7x for Chart Industries. The current 2.4x level is therefore described as expensive relative to that benchmark and above what the model indicates the market could move toward over time. At the same time, the stock is labelled good value versus a 4x peer average, yet still expensive versus the 2x average for the US Machinery industry. This highlights how much of a premium is embedded in the current price for its specific growth and profitability profile.

Result: Preferred multiple of Price-To-Sales of 2.4x (OVERVALUED)

However, investors in Chart Industries still face deal execution risk around required LNG divestments, and the company is currently loss making, which could pressure sentiment if conditions tighten.

Another View on Chart Industries: Our DCF Check

Where the P/S ratio flags Chart Industries as expensive, our DCF model underlines that caution. With the stock at $209.91 and an estimated future cash flow value of $160.20, the shares screen as overvalued on this approach as well. So what could close that gap?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Chart Industries for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 44 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With mixed signals around valuation and deal risk at Chart Industries, are you ready to look under the hood yourself and move quickly to form an informed view using our 1 key reward and 1 important warning sign?

Looking For More Investment Ideas Beyond Chart Industries?

If Chart Industries has sharpened your focus, do not stop here. Broaden your watchlist with a few targeted stock ideas sourced from the Simply Wall St screener tools.

• Target potential mispricings by scanning companies that combine quality fundamentals with attractive entry points through the 44 high quality undervalued stocks.
• Strengthen your resilience by reviewing businesses that show robust finances using the solid balance sheet and fundamentals stocks screener (48 results).
• Hunt for overlooked potential by checking the screener containing 20 high quality undiscovered gems before others move in.

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.