Genex Power Limited (ASX:GNX), which is in the renewable energy business, and is based in Australia, saw a double-digit share price rise of over 10% in the past couple of months on the ASX. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Genex Power’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Genex Power
What's the opportunity in Genex Power?
According to my valuation model, Genex Power seems to be fairly priced at around 12.52% above my intrinsic value, which means if you buy Genex Power today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth A$0.20, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Genex Power’s low beta implies that the stock is less volatile than the wider market.
What does the future of Genex Power look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 51% over the next couple of years, the future seems bright for Genex Power. 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? GNX’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on GNX, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Genex Power. You can find everything you need to know about Genex Power in the latest infographic research report. If you are no longer interested in Genex Power, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.