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When Should You Buy CenterPoint Energy, Inc. (NYSE:CNP)?

Let's talk about the popular CenterPoint Energy, Inc. (NYSE:CNP). The company's shares saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on CenterPoint Energy’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for CenterPoint Energy

What Is CenterPoint Energy Worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that CenterPoint Energy’s ratio of 19.1x is trading slightly below its industry peers’ ratio of 21.67x, which means if you buy CenterPoint Energy today, you’d be paying a decent price for it. And if you believe that CenterPoint Energy should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, CenterPoint Energy’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from CenterPoint Energy?

earnings-and-revenue-growth
earnings-and-revenue-growth

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 a relatively muted profit growth of 8.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for CenterPoint Energy, at least in the short term.

What This Means For You

Are you a shareholder? CNP’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 CNP? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

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Are you a potential investor? If you’ve been keeping an eye on CNP, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into CenterPoint Energy, you'd also look into what risks it is currently facing. To help with this, we've discovered 3 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in CenterPoint Energy.

If you are no longer interested in CenterPoint Energy, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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