When Should You Buy CenterPoint Energy, Inc. (NYSE:CNP)?

Let's talk about the popular CenterPoint Energy, Inc. (NYSE:CNP). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$26.90 at one point, and dropping to the lows of US$24.43. 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$25.42 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.

View our latest analysis for CenterPoint Energy

What's the opportunity in CenterPoint Energy?

The stock is currently trading at US$25.42 on the share market, which means it is overvalued by 37% compared to my intrinsic value of $18.51. This means that the buying opportunity has probably disappeared for now. 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. CenterPoint Energy's earnings over the next few years are expected to increase by 23%, 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? 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.

If you want to dive deeper into CenterPoint Energy, you'd also look into what risks it is currently facing. Our analysis shows 3 warning signs for CenterPoint Energy (1 can't be ignored!) and we strongly recommend you look at these before investing.

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.

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.

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