Itron (ITRI) Could Be 33% Undervalued As Russell Index Exits Reset The Story

Itron (ITRI) has been removed from several Russell indices, including the Russell 2000 and the Russell 3000 Growth benchmarks. This change is prompting investors to reassess how index related trading flows might influence the stock.

See our latest analysis for Itron.

The share price has seen a 6.29% 1 month share price return but is still down 6.60% over three months and 9.91% year to date, while the 1 year total shareholder return has declined 37.28%, pointing to fading momentum despite recent index related activity and board equity grants.

If you want to see how other grid and infrastructure related stocks are trading, now could be a good time to check out our 35 power grid technology and infrastructure stocks

With Itron trading at a discount to some analyst and intrinsic value estimates after its Russell index exits and a sharp 1 year return decline, the key question now is whether this is a reset opportunity or whether the market already reflects its future growth.

Most Popular Narrative: 32.8% Undervalued

The most followed narrative currently anchors Itron’s fair value at $126.70 versus the last close of $85.11, so it treats the recent share price weakness as a discount rather than a new normal.

Ongoing industry wide digitalization and increased adoption of IoT by utilities are driving higher uptake of Itron's Outcomes (software and analytics) offerings, which are higher margin and boost recurring revenue, supporting continued net margin and earnings expansion.

Read the complete narrative.

Want to see what is baked into that $126.70 fair value for Itron? The narrative leans on steady revenue growth, a step up in profitability and a future earnings multiple that sits below many electronics peers. Curious how those moving parts combine into one number and what has to go right for it to hold up.

Result: Fair Value of $126.70 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, for this Itron narrative to play out, prolonged regulatory or customer delays on large utility projects, as well as slower than expected Outcomes segment growth, could both undermine the upside case.

Find out about the key risks to this Itron narrative.

Next Steps

With sentiment on Itron clearly mixed, with both risk flags and upside arguments in play, now is the time to review the numbers yourself and weigh the 4 key rewards and 2 important warning signs.

Looking for more investment ideas beyond Itron?

If you stop at Itron, you could miss other stocks that better match your goals, so put a few minutes into comparing these idea lists right now.

• Target dependable income by reviewing companies that currently screen as 7 dividend fortresses and see which payouts fit your risk comfort and cash flow needs.
• Hunt for value oriented opportunities using the screener containing 18 high quality undiscovered gems so you can spot lesser known companies with stronger fundamentals than their share price suggests.
• Prioritize resilience in tougher markets by checking stocks highlighted in the 74 resilient stocks with low risk scores and compare how their profiles stack up against your existing holdings.

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.

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