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Voltalia SA (ENXTPA:VLTSA), a renewable energy company based in France, saw significant share price volatility over the past couple of months on the ENXTPA, rising to the highs of €11 and falling to the lows of €8.85. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Voltalia’s current trading price of €9.7 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Voltalia’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Voltalia
What’s the opportunity in Voltalia?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Voltalia’s ratio of 1.46x is trading slightly above its industry peers’ ratio of 1.15x, which means if you buy Voltalia today, you’d be paying a relatively fair price for it. And if you believe Voltalia should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Voltalia’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 Voltalia?
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. In Voltalia’s case, its revenues over the next couple of years are expected to double, indicating an incredibly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in VLTSA’s positive outlook, 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 VLTSA? Will you have enough confidence to invest in the company should the price drop below its fair value?