Should You Buy Contact Energy Limited (NZSE:CEN)?
Contact Energy Limited (NZSE:CEN), a utilities company based in New Zealand, saw significant share price volatility over the past couple of months on the NZSE, rising to the highs of $5.71 and falling to the lows of $5.11. 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 CEN's current trading price of $5.45 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 CEN’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Contact Energy
What is CEN worth?
Great news for investors – CEN is still trading at a fairly cheap price. My valuation model shows that the stock’s value should be $7.04 but it is currently trading at $5.45 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, CEN’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because CEN’s stock is less volatile than the wider market given its low beta.
Can we expect growth from CEN?
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. With profit expected to grow by 37.14% over the next couple of years, the future seems bright for CEN. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since CEN is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on CEN for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CEN. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Contact Energy. You can find everything you need to know about CEN in the latest infographic research report. If you are no longer interested in Contact Energy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
