Is There Now An Opportunity In EVN AG (VIE:EVN)?

While EVN AG (VIE:EVN) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the WBAG over the last few months. As a €4.2b market-cap stock, it seems odd EVN is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Today I will analyse the most recent data on EVN’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for EVN

Is EVN still cheap?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 19.76x is currently well-above the industry average of 14.1x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that EVN’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

Can we expect growth from EVN?

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. With profit expected to grow by 28% over the next couple of years, the future seems bright for EVN. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in EVN’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe EVN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 EVN 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 positive outlook is encouraging for EVN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about EVN as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for EVN you should be aware of.

If you are no longer interested in EVN, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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