Cabot Corporation (NYSE:CBT), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$103 at one point, and dropping to the lows of US$86.96. 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 Cabot's current trading price of US$86.96 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Cabot's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Is Cabot Still Cheap?

According to our valuation model, the stock is currently overvalued by about 33%, trading at US$86.96 compared to our intrinsic value of $65.16. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Cabot's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Cabot 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. However, with a relatively muted revenue growth of 9.9% expected over the next couple of years, growth doesn't seem like a key driver for a buy decision for Cabot, at least in the short term.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in CBT's future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CBT should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you've been keeping tabs on CBT for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the positive outlook means it's worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Cabot and we think they deserve your attention.

If you are no longer interested in Cabot, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com