At US$28.34, Is It Time To Put CenterPoint Energy, Inc. (NYSE:CNP) On Your Watch List?

Today we're going to take a look at the well-established CenterPoint Energy, Inc. (NYSE:CNP). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$31.31 and falling to the lows of US$27.32. 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 CenterPoint Energy's current trading price of US$28.34 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CenterPoint 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 CenterPoint Energy

What Is CenterPoint Energy Worth?

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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.74x is currently trading slightly below its industry peers’ ratio of 20.5x, which means if you buy CenterPoint Energy today, you’d be paying a decent price for it. And if you believe CenterPoint Energy 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 CenterPoint Energy’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.

Can we expect growth from CenterPoint Energy?

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 relatively muted profit growth of 8.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for CenterPoint Energy, at least in the short term.

What This Means For You

Are you a shareholder? CNP’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at CNP? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on CNP, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing CenterPoint Energy at this point in time. When we did our research, we found 3 warning signs for CenterPoint Energy (1 is concerning!) that we believe deserve your full attention.

If you are no longer interested in CenterPoint Energy, 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.