Advertisement

What Does RWE Aktiengesellschaft's (ETR:RWE) Share Price Indicate?

Let's talk about the popular RWE Aktiengesellschaft (ETR:RWE). The company's shares received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €34.44 at one point, and dropping to the lows of €21.00. 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 RWE's current trading price of €22.60 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 RWE’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for RWE

Is RWE still cheap?

The stock is currently trading at €22.60 on the share market, which means it is overvalued by 48% compared to my intrinsic value of €15.24. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that RWE’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from RWE?

XTRA:RWE Past and Future Earnings April 2nd 2020
XTRA:RWE Past and Future Earnings April 2nd 2020

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. RWE’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in RWE’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe RWE 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 RWE 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 positive outlook is encouraging for RWE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on RWE. You can find everything you need to know about RWE in the latest infographic research report. If you are no longer interested in RWE, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.