WGL Holdings Inc (NYSE:WGL), a gas utilities company based in United States, maintained its current share price over the past couple of month on the NYSE, with a relatively tight range of $81.22 to $88.11. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at WGL Holdings’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 WGL Holdings

What’s the opportunity in WGL Holdings?

The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 15.81x is currently trading slightly below its industry peers’ ratio of 19.76x, which means if you buy WGL Holdings today, you’d be paying a reasonable price for it. And if you believe that WGL Holdings should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like WGL Holdings’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 WGL Holdings generate?

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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for WGL Holdings, at least in the near future.

What this means for you:

Are you a shareholder? Currently, WGL 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 reduce the risk in 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 WGL, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on WGL for a while, now may not be the most advantageous 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 WGL should the price fluctuate below its true value.