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Why Red Eléctrica Corporación SA (BME:REE) Could Be A Buy

Red Eléctrica Corporación SA (BME:REE) saw a double-digit share price rise of over 10% in the past couple of months on the BME. 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 I will analyse the most recent data on Red Eléctrica Corporación’s outlook and valuation to see if the opportunity still exists. See our latest analysis for Red Eléctrica Corporación

Is Red Eléctrica Corporación still cheap?

The stock is currently trading at €17.75 on the share market, which means it is overvalued by 32.21% compared to my intrinsic value of €13.43. This means that the buying opportunity has probably disappeared for now. Furthermore, Red Eléctrica Corporación’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Red Eléctrica Corporación?

BME:REE Future Profit June 21st 18
BME:REE Future Profit June 21st 18

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. Though in the case of Red Eléctrica Corporación, it is expected to deliver a relatively unexciting earnings growth of 0.96%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? REE’s future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe REE should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

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Are you a potential investor? If you’ve been keeping tabs on REE for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Red Eléctrica Corporación. You can find everything you need to know about Red Eléctrica Corporación in the latest infographic research report. If you are no longer interested in Red Eléctrica Corporación, you can use our free platform to see my list of over 50 other stocks with a high growth potential.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.