Is CenterPoint Energy, Inc. (NYSE:CNP) Potentially Undervalued?

CenterPoint Energy, Inc. (NYSE:CNP) saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine CenterPoint Energy’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for CenterPoint Energy

What's the opportunity in CenterPoint Energy?

The stock is currently trading at US$30.61 on the share market, which means it is overvalued by 33% compared to my intrinsic value of $22.93. Not the best news for investors looking to buy! Another thing to keep in mind is that CenterPoint Energy’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

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. With profit expected to grow by a double-digit 19% over the next couple of years, the outlook is positive for CenterPoint Energy. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? CNP’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CNP should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CNP for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for CNP, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 5 warning signs for CenterPoint Energy you should be mindful of and 1 of these is potentially serious.

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.