At zł20.59, Is Pepco Group N.V. (WSE:PCO) Worth Looking At Closely?

Pepco Group N.V. (WSE:PCO), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the WSE. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Pepco Group’s outlook and valuation to see if the opportunity still exists.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Is Pepco Group Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 4.17% above our intrinsic value, which means if you buy Pepco Group today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth PLN19.77, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Pepco Group’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

View our latest analysis for Pepco Group

What does the future of Pepco Group 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. However, with an expected decline of -8.8% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Pepco Group. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, PCO appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on PCO for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on PCO should the price fluctuate below its true value.

Diving deeper into the forecasts for Pepco Group mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.