MEG Energy Corp (TSX:MEG), an energy company based in Canada, received a lot of attention from a substantial price increase on the TSX over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at MEG Energy’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for MEG Energy
What’s the opportunity in MEG Energy?The stock is currently trading at CA$6.51 on the share market, which means it is overvalued by 35% compared to my intrinsic value of CA$4.83. This means that the opportunity to buy MEG Energy at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that MEG Energy’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.
Can we expect growth from MEG Energy?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. Though in the case of MEG Energy, 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? If you believe MEG should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. 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 tabs on MEG for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on MEG Energy. You can find everything you need to know about MEG Energy in the latest infographic research report. If you are no longer interested in MEG Energy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.