Has the 32% Rally Priced In Engie’s Renewable Expansion for 2025?

If you are weighing what to do with your Engie shares or considering jumping in, this is one of those moments when the numbers really get your attention. After a run that has pushed Engie’s share price up 20.5% year to date and 31.8% over the past twelve months, it is only natural to wonder if the gains are set to continue or if it is time to lock in profits. Over the past three years, the stock has more than doubled, returning 105%, while the five-year return stands at an impressive 126.3%. Market sentiment has been buoyed by favorable developments across the European energy sector, particularly around renewable investments and regulatory clarity. These factors have shaped how investors assess Engie’s long-term growth prospects and risk profile. Yet, even with this remarkable run, our valuation analysis gives Engie a robust score of 5 out of 6 for undervaluation, which is a rare signal among its peers. In a moment, we will break down exactly what goes into that score, compare different approaches to valuation, and show why there may still be more to the Engie story than recent price moves or traditional metrics reveal.

Engie delivered 31.8% returns over the last year. See how this stacks up to the rest of the Integrated Utilities industry.

Approach 1: Engie Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's value. This approach aims to measure what the business is truly worth, rather than simply relying on current market pricing.

For Engie, the analysis starts with its most recent twelve-month Free Cash Flow, which stands at negative €6.64 billion, reflecting recent volatility and investment cycles. However, analysts expect Engie’s Free Cash Flow to recover and grow significantly in the coming years, rising to €2.42 billion by 2029 based on consensus projections. While annual estimates are available for the next five years, further projections up to 2035 are extrapolated to illustrate long-term potential.

Using these forecasts, the DCF model calculates an intrinsic value per share of €24.34. At current market prices, this valuation suggests Engie stock is trading at a 23.1% discount to its fair value. In other words, the market price is meaningfully below what the underlying business fundamentals imply.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Engie.

Our Discounted Cash Flow (DCF) analysis suggests Engie is undervalued by 23.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Engie Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a widely accepted metric for valuing profitable companies like Engie, as it directly relates the company’s share price to its per-share earnings. For businesses with steady profits, the PE ratio offers insight into how much investors are willing to pay for each euro of earnings. This makes it a useful starting point for comparison.

However, what qualifies as a “normal” or “fair” PE ratio is influenced by expectations for future growth and the perceived risk of the business. Rapidly growing companies or those in low-risk environments can justify higher PE multiples, while riskier or slower-growing firms typically trade at lower ratios. This context is crucial in assessing if a stock is truly cheap or expensive.

Currently, Engie trades at a PE ratio of 9.2x. For context, the average PE among integrated utilities peers is 18.3x, and the industry average stands at 18.2x. Engie’s PE is significantly below both these benchmarks. However, benchmarks alone do not capture company-specific nuances.

This is where Simply Wall St’s “Fair Ratio” comes in. The Fair Ratio for Engie, based on factors like earnings growth, industry, profit margin, market capitalization, and risk profile, is determined to be 16.3x. Unlike simple peer and industry comparisons, the Fair Ratio adjusts for the company’s unique attributes. This provides a more tailored valuation perspective and a clearer picture of intrinsic value.

With Engie’s current PE ratio well below its Fair Ratio, this signals the stock remains undervalued even after its recent strong run.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Engie Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple and powerful tool that goes beyond numbers and ratios, giving you the story behind a company's future. It is your perspective on where Engie is heading and why. With Narratives, you connect Engie’s business story, such as expansion into renewables or exposure to FX headwinds, to forecasts for revenue, earnings, and profit margins, then link those assumptions directly to your own fair value for the stock.

Millions of investors share and compare their Narratives on the Simply Wall St Community page, making it easy and accessible for anyone to participate. By creating or following a Narrative, you can compare what you believe is Engie’s true value against its current market price, helping you decide whether now is the right moment to buy, hold, or sell. Narratives automatically update when new information such as quarterly results or major news hits the market, so your view stays informed and relevant.

For example, some investors believe Engie is worth just €17.5 per share due to FX risks and slowing earnings, while others forecast as high as €24, reflecting optimism about renewables growth and resilient margins. What is your Narrative?

Do you think there's more to the story for Engie? Create your own Narrative to let the Community know!

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.

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