Is There Now An Opportunity In Grenergy Renovables, S.A. (BME:GRE)?

Grenergy Renovables, S.A. (BME:GRE), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the BME over the last few months, increasing to €29.20 at one point, and dropping to the lows of €23.90. 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 Grenergy Renovables' current trading price of €23.90 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Grenergy Renovables’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 Grenergy Renovables

Is Grenergy Renovables Still Cheap?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Grenergy Renovables’s ratio of 65.17x is above its peer average of 16.23x, which suggests the stock is trading at a higher price compared to the Renewable Energy industry. Another thing to keep in mind is that Grenergy Renovables’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What does the future of Grenergy Renovables 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. With profit expected to more than double over the next couple of years, the future seems bright for Grenergy Renovables. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? GRE’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe GRE should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on GRE for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for GRE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Grenergy Renovables as a business, it's important to be aware of any risks it's facing. When we did our research, we found 4 warning signs for Grenergy Renovables (2 don't sit too well with us!) that we believe deserve your full attention.

If you are no longer interested in Grenergy Renovables, 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.