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Public Joint-Stock Company Lenenergo (MCX:LSNG), which is in the electric utilities business, and is based in Russia, saw its share price hover around a small range of RUB5.59 to RUB6.08 over the last few weeks. But is this actually reflective of the share value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Lenenergo’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Lenenergo
What is Lenenergo worth?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 4.61x is currently trading slightly below its industry peers’ ratio of 7.08x, which means if you buy Lenenergo today, you’d be paying a fair price for it. And if you believe Lenenergo should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Is there another opportunity to buy low in the future? Since Lenenergo’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Lenenergo look like?
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 Lenenergo, it is expected to deliver a negative revenue growth of -2.5% over the next couple of 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? Currently, LSNG appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on LSNG, take a look at whether its fundamentals have changed.