Growth expectations for Electricité de France S.A. (EPA:EDF) are high, but many investors are starting to ask whether its last close at €10.54 can still be rationalized by the future potential. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.
View our latest analysis for Electricité de France
Where’s the growth?
Investors in Electricité de France have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. Expectations from 16 analysts are certainly positive with earnings per share estimated to rise from today’s level of €0.625 to €1.118 over the next three years. This results in an annual growth rate of 14%, on average, which signals a market-beating outlook in the upcoming years.
Is EDF’s share price justifiable by its earnings growth?
Electricité de France is trading at quite low price-to-earnings (PE) ratio of 16.85x. This tells us the stock is overvalued compared to the FR market average ratio of 16.81x , and overvalued based on current earnings compared to the Electric Utilities industry average of 11.83x .
We already know that EDF appears to be overvalued when compared to its industry average. However, since Electricité de France is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 16.85x and expected year-on-year earnings growth of 14% give Electricité de France a higher PEG ratio of 1.22x. Based on this growth, Electricité de France’s stock can be considered slightly overvalued , based on the fundamentals.
What this means for you:
EDF’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Financial Health: Are EDF’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has EDF been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of EDF’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.