Is Now An Opportune Moment To Examine VGP NV (EBR:VGP)?

VGP NV (EBR:VGP), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the ENXTBR. As a €2.5b market-cap stock, it seems odd VGP 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? Let’s take a look at VGP’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for VGP

What's The Opportunity In VGP?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that VGP’s ratio of 4.17x is trading slightly below its industry peers’ ratio of 5.74x, which means if you buy VGP today, you’d be paying a reasonable price for it. And if you believe VGP should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like VGP’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of VGP look like?

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. 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. Though in the case of VGP, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, VGP appears to be trading around industry price multiples, 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 VGP, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on VGP for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This 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 crystallize your views on VGP should the price fluctuate below the industry PE ratio.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To help with this, we've discovered 6 warning signs (3 are potentially serious!) that you ought to be aware of before buying any shares in VGP.

If you are no longer interested in VGP, 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.