Is Enel Generación Chile S.A. (SNSE:ENELGXCH) Potentially Undervalued?

Enel Generación Chile S.A. (SNSE:ENELGXCH), might not be a large cap stock, but it saw significant share price movement during recent months on the SNSE, rising to highs of CL$493 and falling to the lows of CL$416. 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 Enel Generación Chile's current trading price of CL$439 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 Enel Generación Chile’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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Is Enel Generación Chile Still Cheap?

Good news, investors! Enel Generación Chile is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.32x is currently well-below the industry average of 9.56x, meaning that it is trading at a cheaper price relative to its peers. Enel Generación Chile’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Check out our latest analysis for Enel Generación Chile

What does the future of Enel Generación Chile look like?

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 Enel Generación Chile, it is expected to deliver a negative earnings growth of -8.2%, 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 ENELGXCH is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to ENELGXCH, 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 tabs on ENELGXCH for some time, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, 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 want to dive deeper into Enel Generación Chile, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Enel Generación Chile and we think they deserve your attention.

If you are no longer interested in Enel Generación Chile, 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.