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How APD’s Valuation Is Faring Compared to Its Peers


Jul. 3 2018, Updated 7:30 a.m. ET

APD’s one-year forward PE

As of June 28, Air Products and Chemicals’ (APD) one-year forward PE is 19.5x. In comparison, its peer Praxair (PX) has a one-year forward PE of 22.20x.

Forward PE is a measure investors can use to compare two or more companies operating in the same industry to tell which is overvalued and which is undervalued. This valuation method considers the companies’ future estimated earnings at the time of calculating their valuations.

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APD trading lower than its peers

Right now, APD is still trading at a lower multiple than its peers. In the next four quarters, analysts expect APD’s adjusted EPS to be ~$7.71, representing a rise of 12.5% over the previous year. APD’s growth is expected to be driven by an increase in prices and volumes. Further, APD’s acquisition of Shell’s Coal Gasification business and the expansion of its Indian facility should drive its growth. The addition of new clients and orders is also expected to strengthen its order backlog, which should boost APD’s growth when the orders are carried out.

On the other hand, analysts expect PX’s adjusted EPS for the next four quarters to be $6.88, a rise of 12.2% over the previous year. However, the expected merger between Praxair and Linde is expected to drive PX’s earnings growth via cost-saving synergies. As a result, PX is trading at a premium. It should be noted that the European Union’s regulatory arm is expected to decide on the merger in August.

Investors can indirectly hold APD by investing in the Invesco WilderHill Clean Energy ETF (PBW), which invests 2.7% of its holdings in APD. The fund also provides exposure to Tesla (TSLA) and Albemarle (ALB) at weights of 3.3% and 2.9%, respectively, as of June 28.


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