Should You Investigate RWE Aktiengesellschaft (ETR:RWE) At €30.17?

RWE Aktiengesellschaft (ETR:RWE) saw significant share price movement during recent months on the XTRA, rising to highs of €33.71 and falling to the lows of €28.64. 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 RWE's current trading price of €30.17 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at RWE’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for RWE

Is RWE still cheap?

According to my valuation model, RWE seems to be fairly priced at around 19.17% above my intrinsic value, which means if you buy RWE today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth €25.32, there’s only an insignificant downside when the price falls to its real value. What's more, RWE’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What does the future of RWE look like?

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. 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 a negative profit growth of -2.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for RWE. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? RWE seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on RWE for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on RWE should the price fluctuate below its true value.

If you want to dive deeper into RWE, you'd also look into what risks it is currently facing. For instance, we've identified 4 warning signs for RWE (1 doesn't sit too well with us) 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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