Let's talk about the popular The AES Corporation (NYSE:AES). The company's shares saw a decent share price growth of 17% on the NYSE over the last few months. 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. But what if there is still an opportunity to buy? Let's examine AES's valuation and outlook in more detail to determine if there's still a bargain opportunity.
What Is AES Worth?
Great news for investors – AES is still trading at a fairly cheap price 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 18x is currently well-below the industry average of 28.13x, meaning that it is trading at a cheaper price relative to its peers. What's more interesting is that, AES's share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from AES?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. AES' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? Since AES is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on AES for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy AES. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
If you'd like to know more about AES as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 4 warning signs for AES (of which 1 makes us a bit uncomfortable!) you should know about.
If you are no longer interested in AES, 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.
