At AU$0.26, Is It Time To Put Genex Power Limited (ASX:GNX) On Your Watch List?

While Genex Power Limited (ASX:GNX) might not be the most widely known stock at the moment, it led the ASX gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Genex Power’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Genex Power

Is Genex Power still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 10.51% 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$0.24, there’s only an insignificant downside when the price falls to its real value. In addition to this, Genex Power has a low beta, which suggests its share price is less volatile than the wider market.

What kind of growth will Genex Power generate?

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 67% 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 track record of its management team. 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 tabs on GNX, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

If you'd like to know more about Genex Power as a business, it's important to be aware of any risks it's facing. For example - Genex Power has 3 warning signs we think you should be aware of.

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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. 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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