Is It Time To Consider Buying Veolia Environnement S.A. (EPA:VIE)?

By
Simply Wall St
Published
May 11, 2022
ENXTPA:VIE
Source: Shutterstock

Veolia Environnement S.A. (EPA:VIE) saw significant share price movement during recent months on the ENXTPA, rising to highs of €32.93 and falling to the lows of €24.78. 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 Veolia Environnement's current trading price of €25.56 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 Veolia Environnement’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Veolia Environnement

What's the opportunity in Veolia Environnement?

Veolia Environnement appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 43.45x is currently well-above the industry average of 13.16x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Veolia Environnement’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Veolia Environnement?

earnings-and-revenue-growth
ENXTPA:VIE Earnings and Revenue Growth May 11th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Veolia Environnement's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? VIE’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe VIE should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on VIE for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for VIE, which means it’s worth diving deeper into other factors 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. When we did our research, we found 5 warning signs for Veolia Environnement (1 is a bit concerning!) that we believe deserve your full attention.

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

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