At US$20.37, Is Clearway Energy, Inc. (NYSE:CWEN.A) Worth Looking At Closely?

Clearway Energy, Inc. (NYSE:CWEN.A), is not the largest company out there, but it saw a decent share price growth in the teens level on the NYSE over the last few months. As a mid-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, could the stock still be trading at a relatively cheap price? Let’s take a look at Clearway Energy’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Clearway Energy

Is Clearway Energy Still Cheap?

Clearway Energy is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. 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 Clearway Energy’s ratio of 29.06x is above its peer average of 20.81x, which suggests the stock is trading at a higher price compared to the Renewable Energy industry. Another thing to keep in mind is that Clearway Energy’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers 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 for it to fall back down into an attractive buying range again.

Can we expect growth from Clearway Energy?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Clearway Energy's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? CWEN.A’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CWEN.A should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 CWEN.A for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for CWEN.A, 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 Clearway Energy, you'd also look into what risks it is currently facing. For instance, we've identified 4 warning signs for Clearway Energy (1 makes us a bit uncomfortable) you should be familiar with.

If you are no longer interested in Clearway 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.