It’s important to remember that a “normal” or “fair” PE ratio varies based on expectations for growth and risk. Companies with higher expected earnings growth often command higher PE ratios, while those facing uncertainty or greater risks tend to trade at lower multiples. For Engie, the current PE ratio stands at 10.4x. This is notably less than both the Integrated Utilities industry average of 18.3x and the peer group’s average of 20.0x. This suggests the stock is trading at a discount relative to its competitors.

Simply Wall St introduces the concept of a Fair Ratio, which is a proprietary estimate of what the PE ratio should be for Engie based on a holistic view of its earnings growth, industry landscape, profit margin, company size and risk profile. Unlike simple peer or sector comparisons, this Fair Ratio provides a more nuanced valuation lens. For Engie, the Fair Ratio is calculated at 14.0x, indicating what the market might reasonably pay considering its unique characteristics.

When comparing Engie’s actual PE of 10.4x with the Fair Ratio of 14.0x, the difference is fairly significant. This analysis suggests that, even after a strong share price run, Engie still trades at a discount based on its expected earnings and underlying company fundamentals.

Result: UNDERVALUED

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Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your story about a company, connecting what you believe about Engie’s future (like growth, earnings potential and risks) with the expected financial results, and from there to what you think the stock is worth today. Instead of only relying on rigid models, Narratives allow you to combine your perspective with real financial forecasts in an intuitive way, giving context to fair value estimates.

Narratives are easy to use and accessible to everyone on Simply Wall St’s Community page, where millions of investors create and share their reasoning. By building a Narrative, you see how changes in the business, market, or your assumptions update both the forecast and the resulting fair value in real time. For example, one investor might expect Engie’s earnings to fall to €3.8 billion and view €17.5 as fair value, while another sees new projects boosting earnings to €4.5 billion and believes €24.0 is justified.

This approach makes it easier to spot when the current price offers a buying or selling opportunity and keeps your investment view flexible as news or earnings updates arrive. With Narratives, your decision-making is powered by both numbers and context, not just standard models.

Do you think there’s more to the story for Engie? Head over to our Community to see what others are saying!

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.

Companies discussed in this article include ENGI.PA.

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