At €38.88, Is Nexity SA (EPA:NXI) Worth Looking At Closely?

By
Simply Wall St
Published
January 13, 2022
ENXTPA:NXI
Source: Shutterstock

Nexity SA (EPA:NXI), might not be a large cap stock, but it maintained its current share price over the past couple of month on the ENXTPA, with a relatively tight range of €37.82 to €41.52. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Nexity’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Nexity

Is Nexity still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.35% above my intrinsic value, which means if you buy Nexity today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth €35.55, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Nexity’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Nexity look like?

earnings-and-revenue-growth
ENXTPA:NXI Earnings and Revenue Growth January 13th 2022

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 Nexity, it is expected to deliver a highly negative earnings growth in the next few 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, NXI 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 tabs on NXI 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 NXI should the price fluctuate below its true value.

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 4 warning signs for Nexity (of which 1 is a bit unpleasant!) you should know about.

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

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