Why Good Energy Group PLC (LON:GOOD) Could Be Worth Watching

While Good Energy Group PLC (LON:GOOD) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the AIM. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Good Energy Group’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Good Energy Group

Is Good Energy Group still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17% below my intrinsic value, which means if you buy Good Energy Group today, you’d be paying a fair price for it. And if you believe that the stock is really worth £2.29, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Good Energy Group’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Good Energy Group look like?

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Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted revenue growth of 3.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Good Energy Group, at least in the short term.

What this means for you:

Are you a shareholder? GOOD’s 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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on GOOD, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with Good Energy Group (including 1 which is potentially serious).

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

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. 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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