Should You Buy CMS Energy Corporation (NYSE:CMS) Now?
CMS Energy Corporation (NYSE:CMS) saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $47.19 and falling to the lows of $42.63. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether CMS Energy’s current trading price of $45.44 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CMS Energy’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for CMS Energy
What’s the opportunity in CMS Energy?
According to my relative valuation model, the stock is currently overvalued. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 25.41x is currently well-above the industry average of 19.08x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like CMS Energy’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from CMS Energy?
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. CMS Energy’s earnings over the next few years are expected to increase by 55.54%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? CMS’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe CMS 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 an eye on CMS for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for CMS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on CMS Energy. You can find everything you need to know about CMS Energy in the latest infographic research report. If you are no longer interested in CMS Energy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
