Is Now An Opportune Moment To Examine CenterPoint Energy, Inc. (NYSE:CNP)?

Let's talk about the popular CenterPoint Energy, Inc. (NYSE:CNP). The company's shares saw significant share price movement during recent months on the NYSE, rising to highs of US$30.83 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$28.47 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?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 CenterPoint Energy’s ratio of 22.37x is trading slightly above its industry peers’ ratio of 19.55x, which means if you buy CenterPoint Energy today, you’d be paying a relatively sensible price for it. And if you believe CenterPoint Energy should be trading in this range, then there isn’t really any room for the share price 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.

What kind of growth will CenterPoint Energy generate?

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. CenterPoint Energy's earnings over the next few years are expected to increase by 40%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in CNP’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at CNP? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on CNP, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for CNP, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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. To help with this, we've discovered 2 warning signs (1 is significant!) that you ought to be aware of before buying any shares in CenterPoint Energy.

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.