AusNet Services Ltd (ASX:AST), a electric utilities company based in Australia, received a lot of attention from a substantial price movement on the ASX in the over the last few months, increasing to A$1.76 at one point, and dropping to the lows of A$1.58. 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 AusNet Services’s current trading price of A$1.64 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 AusNet Services’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for AusNet Services

What’s the opportunity in AusNet Services?

The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that AusNet Services’s ratio of 20.98x is trading slightly below its industry peers’ ratio of 22.75x, which means if you buy AusNet Services today, you’d be paying a fair price for it. And if you believe AusNet Services should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, it seems like AusNet Services’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will AusNet Services generate?

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. Though in the case of AusNet Services, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? AST seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on AST, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on AST for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on AST should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on AusNet Services. You can find everything you need to know about AusNet Services in the latest infographic research report. If you are no longer interested in AusNet Services, 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.