At US$24.90, 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 significant share price rise of 27% in the past couple of months on the NYSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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. But what if there is still an opportunity to buy? Let’s examine Clearway Energy’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Clearway Energy

What's The Opportunity In Clearway Energy?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 37.86x is currently trading slightly above its industry peers’ ratio of 34.5x, which means if you buy Clearway Energy today, you’d be paying a relatively sensible price for it. And if you believe that Clearway Energy should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Clearway Energy’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will Clearway 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. 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. With profit expected to more than double over the next couple of years, the future seems bright for Clearway 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? CWEN.A’s optimistic 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 track record of its management team. Have these factors changed since the last time you looked at CWEN.A? 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 CWEN.A, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for CWEN.A, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 4 warning signs we've spotted with Clearway Energy (including 1 which doesn't sit too well with us).

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.