Let’s talk about the popular EON SE (FRA:EOAN). The company’s shares received a lot of attention from a substantial price movement on the DB over the last few months, increasing to €9.75 at one point, and dropping to the lows of €8.26. 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 E.ON’s current trading price of €8.57 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 E.ON’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in E.ON?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 8.8% below my intrinsic value, which means if you buy E.ON today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €9.39, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like E.ON’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from E.ON?
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. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for E.ON, at least in the near future.
What this means for you:
Are you a shareholder? EOAN seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on EOAN for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on EOAN should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on E.ON. You can find everything you need to know about E.ON in the latest infographic research report. If you are no longer interested in E.ON, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.