What Is ENEA S.A.'s (WSE:ENA) Share Price Doing?

ENEA S.A. (WSE:ENA), is not the largest company out there, but it received a lot of attention from a substantial price movement on the WSE over the last few months, increasing to zł10.15 at one point, and dropping to the lows of zł8.15. 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 ENEA's current trading price of zł8.15 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ENEA’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 ENEA

Is ENEA Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that ENEA’s ratio of 2.42x is trading slightly below its industry peers’ ratio of 3.47x, which means if you buy ENEA today, you’d be paying a decent price for it. And if you believe ENEA should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like ENEA’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of ENEA look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. However, with a negative profit growth of -12% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for ENEA. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, ENA appears to be trading around industry price multiples, 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 optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ENA, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ENA for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This 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 gel your views on ENA should the price fluctuate below the industry PE ratio.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For instance, we've identified 2 warning signs for ENEA (1 is a bit concerning) you should be familiar with.

If you are no longer interested in ENEA, 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.