Is It Too Late To Consider Buying NRG Energy, Inc. (NYSE:NRG)?

While NRG Energy, Inc. (NYSE:NRG) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NYSE, rising to highs of US$45.40 and falling to the lows of US$31.03. 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 NRG Energy's current trading price of US$33.75 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at NRG Energy’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for NRG Energy

What's The Opportunity In NRG Energy?

Great news for investors – NRG Energy is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio 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 NRG Energy’s ratio of 4.12x is below its peer average of 19.13x, which indicates the stock is trading at a lower price compared to the Electric Utilities industry. What’s more interesting is that, NRG Energy’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from NRG 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. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for NRG Energy, at least in the near future.

What This Means For You

Are you a shareholder? Although NRG is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to NRG, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on NRG for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about NRG Energy as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 4 warning signs (2 shouldn't be ignored!) that you ought to be aware of before buying any shares in NRG Energy.

If you are no longer interested in NRG 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.