Today we’re going to take a look at the well-established PPL Corporation (NYSE:PPL). The company’s stock saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $38.37 and falling to the lows of $30.6. 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 PPL’s current trading price of $30.67 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 PPL’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 PPL
What’s the opportunity in PPL?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 13.86x is currently trading slightly below its industry peers’ ratio of 17.89x, which means if you buy PPL today, you’d be paying a fair price for it. And if you believe that PPL 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 PPL’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 PPL generate?
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. 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. With profit expected to grow by a double-digit 15.37% over the next couple of years, the outlook is positive for PPL. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? PPL’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at PPL? Will you have enough confidence to invest in the company should the price drop below its fair value?