When Should You Buy ENCE Energía y Celulosa, S.A. (BME:ENC)?

Published
March 26, 2022
BME:ENC
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ENCE Energía y Celulosa, S.A. (BME:ENC), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the BME 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? Today I will analyse the most recent data on ENCE Energía y Celulosa’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for ENCE Energía y Celulosa

What's the opportunity in ENCE Energía y Celulosa?

According to my valuation model, ENCE Energía y Celulosa seems to be fairly priced at around 11.55% above my intrinsic value, which means if you buy ENCE Energía y Celulosa today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth €2.97, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since ENCE Energía y Celulosa’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of ENCE Energía y Celulosa look like?

earnings-and-revenue-growth
BME:ENC Earnings and Revenue Growth March 26th 2022

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. Though in the case of ENCE Energía y Celulosa, it is expected to deliver a negative revenue growth of -17% over the next couple of 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? Currently, ENC appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 ENC 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 crystalize your views on ENC should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of ENCE Energía y Celulosa.

If you are no longer interested in ENCE Energía y Celulosa, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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About BME:ENC

ENCE Energía y Celulosa

ENCE Energía y Celulosa, S.A., together with its subsidiaries, produces and sells eucalyptus pulp and renewable energy in Spain, Germany, Poland, Italy, France, the United Kingdom, Turkey, Sweden, Romania, Netherlands, Austria, and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation1
Future Growth0
Past Performance1
Financial Health6
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet average dividend payer.