Today we're going to take a look at the well-established Air Products and Chemicals, Inc. (NYSE:APD). The company's stock saw a decent share price growth of 12% on the NYSE over the last few months. The recent share price gains has brought the company back closer to its yearly peak. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Air Products and Chemicals’s outlook and valuation to see if the opportunity still exists.

Is Air Products and Chemicals Still Cheap?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 17.75x is currently trading slightly below its industry peers’ ratio of 21.99x, 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, it seems like Air Products and Chemicals’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Air Products and 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. Though in the case of Air Products and Chemicals, it is expected to deliver a negative earnings growth of -5.5%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, APD appears to be trading around industry price multiples, 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. In addition to this, 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 crystallize your views on APD should the price fluctuate below the industry PE ratio.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To help with this, we've discovered 3 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in Air Products and Chemicals.

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.

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.