Is It Time To Consider Buying Enel Generación Chile S.A. (SNSE:ENELGXCH)?

Enel Generación Chile S.A. (SNSE:ENELGXCH), might not be a large cap stock, but it led the SNSE gainers with a relatively large price hike in the past couple of weeks. As a CL$2.2t market-cap stock, it seems odd Enel Generación Chile is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Enel Generación Chile’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Enel Generación Chile

Is Enel Generación Chile Still Cheap?

Good news, investors! Enel Generación Chile is still a bargain right now. According to my valuation, the intrinsic value for the stock is CLP412.17, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Enel Generación Chile’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

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. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Enel Generación Chile, at least in the near future.

What This Means For You

Are you a shareholder? Although ENELGXCH 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 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 an eye on ENELGXCH 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.

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 2 warning signs for Enel Generación Chile (1 is potentially serious) you should be familiar with.

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.