Essential Utilities, Inc. (NYSE:WTRG), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$40.55 and falling to the lows of US$36.18. 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 Essential Utilities' current trading price of US$36.18 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 Essential Utilities's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What's The Opportunity In Essential Utilities?

According to our valuation model, Essential Utilities seems to be fairly priced at around 17% below our intrinsic value, which means if you buy Essential Utilities today, you'd be paying a fair price for it. And if you believe that the stock is really worth $43.35, then there's not much of an upside to gain from mispricing. Furthermore, Essential Utilities's low beta implies that the stock is less volatile than the wider market.

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. Essential Utilities' earnings over the next few years are expected to increase by 25%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? WTRG's optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you've been keeping an eye on WTRG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Essential Utilities at this point in time. For example, we've found that Essential Utilities has 3 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.

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.