Meridian Energy Limited (NZSE:MEL), a renewable energy company based in New Zealand, maintained its current share price over the past couple of month on the NZSE, with a relatively tight range of NZ$2.75 to NZ$2.99. However, does this price actually reflect the true value 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
What is Meridian Energy worth?The stock is currently trading at NZ$2.84 on the share market, which means it is overvalued by 22% compared to my intrinsic value of NZ$2.32. Not the best news for investors looking to buy! In addition to this, it seems like Meridian Energy’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Meridian Energy look like?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. Meridian Energy’s earnings over the next few years are expected to increase by 35.40%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in MEL’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe MEL should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 MEL for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for MEL, which means it’s worth diving deeper into other factors 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.