Advertisement
New Zealand markets open in 5 hours 54 minutes
  • NZX 50

    11,836.04
    -39.31 (-0.33%)
     
  • NZD/USD

    0.5918
    -0.0001 (-0.02%)
     
  • ALL ORDS

    7,898.90
    +37.90 (+0.48%)
     
  • OIL

    82.71
    +0.02 (+0.02%)
     
  • GOLD

    2,399.00
    +10.60 (+0.44%)
     

Is It Time To Consider Buying Edison International (NYSE:EIX)?

Let's talk about the popular Edison International (NYSE:EIX). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$73.17 at one point, and dropping to the lows of US$62.25. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Edison International's current trading price of US$66.54 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Edison International’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 Edison International

What's The Opportunity In Edison International?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Edison International’s ratio of 20.68x is trading slightly above its industry peers’ ratio of 17.58x, which means if you buy Edison International today, you’d be paying a relatively sensible price for it. And if you believe that Edison International should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Edison International’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Edison International look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. With profit expected to grow by 84% over the next couple of years, the future seems bright for Edison International. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? EIX’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 EIX? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

ADVERTISEMENT

Are you a potential investor? If you’ve been keeping tabs on EIX, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for EIX, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Edison International as a business, it's important to be aware of any risks it's facing. For example, we've found that Edison International has 3 warning signs (2 can't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Edison International, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.