Yahoo Finance Utilities Industry: A Dive Into Valener Inc (TSE:VNR)
Valener Inc (TSE:VNR), a CA$788.7m small-cap, is a utility company operating in an industry which has continued to cope with the rising costs and complexities of maintaining legacy systems, while less traditional challenges are emerging. Utilities analysts are forecasting for the entire industry, a relatively muted growth of 5.0% in the upcoming year , and a strong near-term growth of 26.1% over the next couple of years. However, this rate came in below the growth rate of the Canadian stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Valener is a laggard or leader relative to its utilities sector peers.
View our latest analysis for Valener
What’s the catalyst for Valener’s sector growth?
Moving forward, key issues facing utility companies include climate change and environmental concerns, and new entrants and disruptive technology. Over the past year, the industry saw growth in the twenties, beating the Canadian market growth of 13.7%. Valener lags the pack with its negative growth rate of -18.4% over the past year, which indicates the company has been growing at a slower pace than its utilities peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 14.2% in the upcoming year. This future growth may make Valener a more expensive stock relative to its peers.
Is Valener and the sector relatively cheap?
Gas utility companies are typically trading at a PE of 17.94x, relatively similar to the rest of the Canadian stock market PE of 16.81x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 10.8% on equities compared to the market’s 10.4%. On the stock-level, Valener is trading at a PE ratio of 17.66x, which is relatively in-line with the average utilities stock. In terms of returns, Valener generated 6.2% in the past year, which is 4.6% below the utilities sector.
Next Steps:
Valener’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Valener has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Valener’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has VNR’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Valener? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
