What Does NRG Energy, Inc.'s (NYSE:NRG) Share Price Indicate?

NRG Energy, Inc. (NYSE:NRG), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. 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, what if the stock is still a bargain? Let’s examine NRG Energy’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for NRG Energy

Is NRG Energy Still Cheap?

According to my valuation model, NRG Energy seems to be fairly priced at around 3.5% below my intrinsic value, which means if you buy NRG Energy today, you’d be paying a fair price for it. And if you believe the company’s true value is $42.11, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that NRG Energy’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of NRG Energy look like?

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 expected decline of -5.5% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for NRG Energy. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, NRG appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on NRG for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on NRG should the price fluctuate below its true value.

If you want to dive deeper into NRG Energy, you'd also look into what risks it is currently facing. While conducting our analysis, we found that NRG Energy has 1 warning sign and it would be unwise to ignore it.

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.