Why Empresa Nacional de Telecomunicaciones S.A. (SNSE:ENTEL) Could Be Worth Watching

While Empresa Nacional de Telecomunicaciones S.A. (SNSE:ENTEL) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the SNSE, rising to highs of CL$4,910 and falling to the lows of CL$4,361. 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 Empresa Nacional de Telecomunicaciones' current trading price of CL$4,538 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Empresa Nacional de Telecomunicaciones’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 Empresa Nacional de Telecomunicaciones

Is Empresa Nacional de Telecomunicaciones still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Empresa Nacional de Telecomunicaciones’s ratio of 16.22x is trading slightly below its industry peers’ ratio of 16.86x, which means if you buy Empresa Nacional de Telecomunicaciones today, you’d be paying a decent price for it. And if you believe that Empresa Nacional de Telecomunicaciones should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, Empresa Nacional de Telecomunicaciones’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will Empresa Nacional de Telecomunicaciones 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. With profit expected to grow by 64% over the next couple of years, the future seems bright for Empresa Nacional de Telecomunicaciones. 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? ENTEL’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 ENTEL? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on ENTEL, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for ENTEL, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 4 warning signs for Empresa Nacional de Telecomunicaciones (1 makes us a bit uncomfortable) you should be familiar with.

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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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