OPC Energy (TASE:OPCE) has just completed an ILS 600 million fixed income offering, issuing 4.56% bonds due 2033, shortly after reporting second quarter revenue of US$379 million and net income of US$12 million.
See our latest analysis for OPC Energy.
Against this backdrop, OPC Energy's share price has eased in recent months, with a 30 day share price return of a 4.88% decline and a 90 day share price return of a 20.62% decline. However, the 1 year total shareholder return of 84.33% and 3 year total shareholder return of about 3x suggest longer term momentum remains strong.
If this bond issue has you thinking about the broader energy transition theme, it may be a good time to review 92 nuclear energy infrastructure stocks
Fresh bonds now sit alongside a share price that has cooled after a strong multi year run for OPC Energy. Is it more sensible to wait for a deeper pullback, or to start valuing the stock at today’s level?
Price-to-Earnings of 82.1x: Is it justified?
OPC Energy last closed at ₪95.5, and the stock currently trades on a P/E of 82.1x, which puts a rich price on its recent earnings.
The P/E ratio compares the current share price with earnings per share. For a power and renewable energy operator like OPC Energy, it signals how much investors are paying for each unit of profit today.
OPC Energy has delivered very strong reported earnings growth over the past year, with profit up 129.5% and a 5 year earnings growth rate of 58.6% per year. That kind of track record can help explain why the market is comfortable with a higher P/E multiple, even though current Return on Equity of 5.4% is described as low and interest payments are not well covered by earnings.
Compared with the wider Asian Renewable Energy industry average P/E of 14.9x, OPC Energy is described as expensive, yet it is roughly in line with its immediate peer group where the average P/E is 83.7x. That combination suggests investors are valuing the stock closer to peers than to the broader industry.
See what the numbers say about this price — find out in our valuation breakdown.
Result: Price-to-Earnings of 82.1x (OVERVALUED)
However, investors in OPC Energy still need to weigh balance sheet pressure from interest costs, as well as the execution risk tied to its US expansion projects.
Find out about the key risks to this OPC Energy narrative.
Next Steps
With sentiment on OPC Energy clearly mixed, you may want to move quickly and review the underlying data for yourself so you can form your own view based on both sides of the story. To see a concise summary of what stands out on each side, review the 1 key reward and 1 important warning sign
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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.
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