Is It Too Late to Consider Engie After a 159% Five Year Share Price Surge?

• If you are wondering whether Engie is still good value after such a strong run, or if you are turning up late to the party, this breakdown will help you decide whether the current price still makes sense.
• Engie’s share price has barely moved over the last week (up 0.4%) and month (down 0.3%). However, those quiet short term moves sit on top of a 40.0% gain year to date and a 58.6% rise over the past year, with returns of 110.9% over 3 years and 158.8% over 5 years.
• Part of this strength reflects renewed interest in European utilities as investors look for stable cash flows in a higher rate world, alongside structural tailwinds for low carbon energy infrastructure in which Engie is a key player. Recent headlines have focused on the company’s ongoing investments in renewables and networks, as well as regulatory developments around energy transition policies in Europe that shape expectations for its long term growth and risk profile.
• Right now Engie scores 3 out of 6 on our undervaluation checks. This suggests some aspects of the stock still look attractive while others are closer to fully priced. Next we will walk through the main valuation methods analysts use, before finishing with a more powerful way of tying them all together.

Engie delivered 58.6% 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, or DCF, model estimates what a company is worth by projecting its future cash flows and then discounting them back to today in € terms. It is essentially a way of asking what all of Engie’s future cash generation is worth right now.

For Engie, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is negative at about €6.6 billion, reflecting heavy investment and cash outflows rather than steady surplus cash. Analysts provide detailed forecasts for the next few years. Simply Wall St then extrapolates those out, with free cash flow projected to recover to roughly €1.9 billion by 2029 and continue growing more modestly thereafter.

When all these future cash flows are discounted back to today, the model arrives at an intrinsic value of about €16.56 per share. Compared to the current share price, this implies Engie is around 31.2% overvalued on a DCF basis. This suggests the market is already pricing in a very optimistic cash flow recovery.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Engie may be overvalued by 31.2%. Discover 909 undervalued stocks or create your own screener to find better value opportunities.

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

Approach 2: Engie Price vs Earnings

For a mature, profitable utility like Engie, the Price to Earnings, or PE, ratio is a useful way to gauge how much investors are willing to pay for each euro of current profits. It naturally links valuation to the company’s ability to generate earnings today.

What counts as a normal or fair PE depends on how quickly earnings are expected to grow and how risky those earnings are. Faster growth and lower perceived risk usually justify a higher PE, while slower or more volatile earnings deserve a lower one.

Engie currently trades on a PE of about 10.6x, which is well below both the Integrated Utilities industry average of roughly 17.9x and the broader peer group average of around 19.5x. Simply Wall St’s Fair Ratio for Engie, at 15.2x, estimates what its PE should be after adjusting for its specific growth profile, margins, risk factors, size and industry.

This Fair Ratio is more informative than a simple comparison with peers, because it tailors the benchmark to Engie’s own fundamentals rather than assuming all utilities deserve the same multiple. Since Engie’s actual PE of 10.6x sits meaningfully below the 15.2x Fair Ratio, the stock appears attractively priced on earnings.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1457 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 us introduce you to Narratives, a simple way to attach a clear story to your numbers by linking what you believe about Engie’s future revenues, earnings and margins to a concrete financial forecast and fair value estimate.

On Simply Wall St’s Community page, Narratives are an easy, accessible tool used by millions of investors to turn their view of a company into a structured forecast, compare that Fair Value to the current Price, and decide whether they see Engie as a buy, hold or sell today.

Narratives also update dynamically when new information arrives, such as fresh earnings results, major renewables project announcements or changes in analyst expectations, so your fair value view evolves as the story does.

For example, one Engie Narrative might assume its renewables pipeline executes smoothly, margins hold near 6 percent and the stock deserves a higher future PE that leads to a fair value closer to the high analyst targets. A more cautious Narrative could instead focus on energy price normalization, regulatory risk and execution challenges, which would point to a fair value nearer the most conservative estimates and a smaller upside from today’s price.

Do you think there's more to the story for Engie? Head over to our Community to see what others are saying!

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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