When Should You Buy Acciona, S.A. (BME:ANA)?

Today we're going to take a look at the well-established Acciona, S.A. (BME:ANA). The company's stock received a lot of attention from a substantial price increase on the BME over the last few months. The recent jump in the share price has meant that the company is trading at close to its 52-week high. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Acciona’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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What Is Acciona Worth?

According to our 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, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Acciona’s ratio of 11.37x is trading slightly below its industry peers’ ratio of 12.98x, which means if you buy Acciona today, you’d be paying a reasonable price for it. And if you believe Acciona should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Acciona’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

See our latest analysis for Acciona

What does the future of Acciona 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. 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 Acciona, at least in the near future.

What This Means For You

Are you a shareholder? Currently, ANA appears to be trading around industry price multiples, 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 beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ANA, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ANA for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, 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 crystallize your views on ANA should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Acciona at this point in time. Every company has risks, and we've spotted 3 warning signs for Acciona (of which 2 are concerning!) you should know about.

If you are no longer interested in Acciona, 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.