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P/E Ratio Insights for NRG Energy

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Benzinga Insights
·2 min read
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Looking into the current session, NRG Energy Inc. (NYSE:NRG) is trading at $40.05, after a 0.96% drop. Over the past month, the stock decreased by 6.32%, but over the past year, it actually spiked by 12.98%. With questionable short-term performance like this, and great long-term performance, long-term shareholders might want to start looking into the company's price-to-earnings ratio.

Assuming that all other factors are held constant, this could present itself as an opportunity for shareholders trying to capitalize on the higher share price. The stock is currently below from its 52 week high by 8.02%.

Price Candles
Price Candles

The P/E ratio measures the current share price to the company's EPS. It is used by long-term investors to analyze the company's current performance against its past earnings, historical data and aggregate market data for the industry or the indices, such as S&P 500. A higher P/E indicates that investors expect the company to perform better in the future, and the stock is probably overvalued, but not necessarily. It also shows that investors are willing to pay a higher share price currently, because they expect the company to perform better in the upcoming quarters. This leads investors to also remain optimistic about rising dividends in the future.

View more earnings on NRG

Most often, an industry will prevail in a particular phase of a business cycle, than other industries.

Compared to the aggregate P/E ratio of the 20.92 in the Electric Utilities industry, NRG Energy Inc. has a lower P/E ratio of 2.54. Shareholders might be inclined to think that the stock might perform worse than its industry peers. It's also possible that the stock is undervalued.

Price Candles
Price Candles

There are many limitations to P/E ratio. It is sometimes difficult to determine the nature of the earnings makeup of a company. Shareholders might not get what they're looking for, from trailing earnings.

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