Let's talk about the popular Essential Utilities, Inc. (NYSE:WTRG). The company's shares saw a double-digit share price rise of over 10% 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 large-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? Today we will analyse the most recent data on Essential Utilities's outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Essential Utilities
What's The Opportunity In Essential Utilities?
According to our valuation model, Essential Utilities seems to be fairly priced at around 8.51% above our intrinsic value, which means if you buy Essential Utilities today, you'd be paying a relatively reasonable price for it. And if you believe the company's true value is $35.36, then there isn't really any room for the share price grow beyond what it's currently trading. What's more, Essential Utilities's share price may be more stable over time (relative to the market), as indicated by its low beta.
What kind of growth will Essential Utilities generate?
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. With profit expected to grow by 35% over the next couple of years, the future seems bright for Essential Utilities. 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? It seems like the market has already priced in WTRG's positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you've been keeping an eye on WTRG, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it's worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Essential Utilities, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for Essential Utilities (of which 1 can't be ignored!) you should know about.
If you are no longer interested in Essential Utilities, 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.