What Does Veolia Environnement SA's (EPA:VIE) Share Price Indicate?

Let's talk about the popular Veolia Environnement SA (EPA:VIE). The company's shares saw significant share price movement during recent months on the ENXTPA, rising to highs of €30.60 and falling to the lows of €27.23. 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 €29.41 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.

See our latest analysis for Veolia Environnement

Is Veolia Environnement Still Cheap?

Veolia Environnement appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Veolia Environnement’s ratio of 19.78x is above its peer average of 12.22x, which suggests the stock is trading at a higher price compared to the Integrated Utilities industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Veolia Environnement’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Veolia Environnement look like?

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. With profit expected to grow by 66% over the next couple of years, the future seems bright for Veolia Environnement. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in VIE’s positive outlook, 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 tabs on VIE for some time, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 4 warning signs we've spotted with Veolia Environnement (including 1 which is concerning).

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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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.