Let's talk about the popular Eastman Chemical Company (NYSE:EMN). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Eastman Chemical’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Eastman Chemical

What's the opportunity in Eastman Chemical?

According to my valuation model, Eastman Chemical seems to be fairly priced at around 17.77% above my intrinsic value, which means if you buy Eastman Chemical today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $97.60, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Eastman Chemical’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Eastman Chemical 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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Eastman Chemical. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in EMN’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 an eye on EMN, now may not be the most advantageous 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Eastman Chemical at this point in time. While conducting our analysis, we found that Eastman Chemical has 4 warning signs and it would be unwise to ignore them.

If you are no longer interested in Eastman Chemical, 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. 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.

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