Should You Think About Buying Naturgy Energy Group, S.A. (BME:NTGY) Now?

Naturgy Energy Group, S.A. (BME:NTGY) saw significant share price movement during recent months on the BME, rising to highs of €28.62 and falling to the lows of €25.58. 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 Naturgy Energy Group's current trading price of €26.76 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 Naturgy Energy Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Naturgy Energy Group

Is Naturgy Energy Group Still Cheap?

According to my 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, 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 Naturgy Energy Group’s ratio of 15.38x is trading slightly above its industry peers’ ratio of 13.65x, which means if you buy Naturgy Energy Group today, you’d be paying a relatively reasonable price for it. And if you believe that Naturgy Energy Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Naturgy Energy Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Naturgy Energy Group 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. Though in the case of Naturgy Energy Group, it is expected to deliver a negative earnings growth of -6.1%, 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, NTGY 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 de-risk 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 NTGY, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on NTGY 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. 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 NTGY should the price fluctuate below the industry PE ratio.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that Naturgy Energy Group has 3 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Naturgy Energy Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.