Is Now The Time To Look At Buying Nexans S.A. (EPA:NEX)?

While Nexans S.A. (EPA:NEX) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the ENXTPA. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Nexans’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Nexans

What is Nexans worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.2% below my intrinsic value, which means if you buy Nexans today, you’d be paying a fair price for it. And if you believe that the stock is really worth €69.22, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Nexans’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Nexans generate?

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. Though in the case of Nexans, it is expected to deliver a relatively unexciting top-line growth of 0.8% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? NEX’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on NEX, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Nexans you should know about.

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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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