Is Now An Opportune Moment To Examine Energisa S.A. (BVMF:ENGI3)?

Energisa S.A. (BVMF:ENGI3), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the BOVESPA over the last few months, increasing to R$17.09 at one point, and dropping to the lows of R$13.29. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Energisa's current trading price of R$14.05 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Energisa’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Energisa

What is Energisa worth?

Great news for investors – Energisa is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is R$22.89, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Energisa’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Energisa generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Energisa, it is expected to deliver a negative earnings growth of -8.7%, 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? Although ENGI3 is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to ENGI3, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on ENGI3 for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Energisa as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for Energisa (1 can't be ignored!) and we strongly recommend you look at them before investing.

If you are no longer interested in Energisa, 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.