Find winning stocks in any market cycle. Join 7 million investors using Simply Wall St’s investing ideas for FREE.

Enlight Renewable Energy (TASE:ENLT) has been drawing attention after recent share price moves, with the stock last closing at ₪278.7. Investors are weighing this activity in relation to the company’s global renewable energy footprint.

See our latest analysis for Enlight Renewable Energy.

The latest share price at ₪278.7 comes after a 1-month share price return of 11.70% and an 85.80% year to date share price return. The 1-year total shareholder return of over 3x highlights how strongly sentiment around Enlight Renewable Energy has shifted over a longer horizon.

If you are looking beyond a single stock in the energy transition theme, it could be a good time to scan opportunities in 34 power grid technology and infrastructure stocks

After such strong recent share price gains and solid reported revenue and net income growth, the key question now is simple: Is Enlight Renewable Energy still undervalued, or is the market already pricing in its future growth?

Preferred Price-to-Sales of 24.8x: Is it justified?

Enlight Renewable Energy is trading on a P/S ratio of 24.8x, which sits above both its regional renewable energy industry and its peer group despite the recent strong share price performance to ₪278.7.

The P/S ratio compares the company’s market value to its revenue and is often used for businesses where earnings can be noisy or include high non cash items. For a utility scale renewable platform like Enlight Renewable Energy, a higher P/S often reflects expectations around its project pipeline, future revenue potential and perceived quality of its assets rather than current profit levels.

In this case, Enlight Renewable Energy is described as expensive on a P/S of 24.8x versus the Asian renewable energy industry average of 2.5x and also above its peer average of 22.2x. That points to the market assigning a premium to the stock relative to both its sector and closer peers, which only leaves limited room if future revenue and earnings delivery fall short of what is implied in that premium.

Compared to the 2.5x industry level, the current 24.8x P/S suggests investors are paying a much higher multiple of each shekel of sales than is typical for the sector. Against the 22.2x peer average, the premium is smaller but still present, reinforcing the view that the current P/S embeds optimistic expectations rather than a discount.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Preferred multiple of Price-to-Sales of 24.8x (OVERVALUED)

However, high expectations baked into a 24.8x P/S, and any disappointment around its 32.04% revenue or 43.26% net income growth, could quickly pressure sentiment.