Does The Hype Around ENEA S.A.’s (WSE:ENA) Growth Justify Its March Share Price?

ENEA S.A. (WSE:ENA) is considered a high growth stock. However its last closing price of PLN9.8 left investors wondering whether this growth has already been factored into the share price. Below I will be talking through a basic metric which will help answer this question.

View our latest analysis for ENEA

Should you get excited about ENA’s future?

ENEA is poised for significantly high earnings growth in the near future. The consensus forecast from 8 analysts is extremely bullish with earnings per share estimated to rise from today’s level of PLN1.968 to PLN3.499 over the next three years. On average, this leads to a growth rate of 24% each year, which signals a market-beating outlook in the upcoming years.

Is ENA available at a good price after accounting for its growth?

ENEA is available at an extremely low price-to-earnings ratio of 4.98x, showing us it is undervalued based on its latest annual earnings update compared to the Electric Utilities average of 5.06x , and undervalued relative to the current PL market average of 10.84x .

WSE:ENA Price Estimation Relative to Market, March 5th 2019
WSE:ENA Price Estimation Relative to Market, March 5th 2019

ENEA’s price-to-earnings ratio stands at 4.98x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. However, since ENEA is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 4.98x and expected year-on-year earnings growth of 24% give ENEA an extremely low PEG ratio of 0.21x. This means that, when we account for ENEA’s growth, the stock can be viewed as relatively cheap , based on fundamental analysis.

What this means for you:

ENA’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are ENA’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has ENA been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of ENA’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.