Is It Time To Buy Meridian Energy Limited (NZE:MEL)?

By
Simply Wall St
Published
January 20, 2018
NZSE:MEL

Meridian Energy Limited (NZSE:MEL), a renewable energy company based in New Zealand, had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of NZ$2.8 to NZ$2.99. However, is this the true valuation level of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Meridian Energy’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 Meridian Energy

Is Meridian Energy still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2% above my intrinsic value, which means if you buy Meridian Energy today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth NZ$2.87, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, it seems like Meridian Energy’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Meridian Energy generate?

NZSE:MEL Future Profit Jan 21st 18
NZSE:MEL Future Profit Jan 21st 18
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 30.98% over the next couple of years, the future seems bright for Meridian Energy. It looks like higher cash flows 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 already priced in Meridian Energy’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on Meridian Energy, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Meridian Energy. You can find everything you need to know about Meridian Energy in the latest infographic research report. If you are no longer interested in Meridian Energy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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