Nexans (ENXTPA:NEX) Could Be 19% Undervalued As Hydro Supply Deal Lands
Nexans (ENXTPA:NEX) has drawn investor attention after signing a five year agreement with Norsk Hydro for about 85,000 tonnes of low carbon aluminium wire rod, securing key input for its European power cable operations.
See our latest analysis for Nexans.
The Norsk Hydro agreement lands after a mixed period for Nexans, with the share price up 5.46% year to date but down 11.63% over 30 days, while the 1 year total shareholder return of 19.49% and 3 year total shareholder return of 78.84% indicate solid longer term compounding.
If this kind of grid and infrastructure story interests you, it can be worth scanning for other power grid and electrification plays using our 33 power grid technology and infrastructure stocks
After a sharp 30 day pullback, Nexans now trades at a clear discount to both analyst targets and an estimated intrinsic value. Is the market being sensibly cautious, or has it marked the stock down too far ahead of the next phase of analysis?
Most Popular Narrative: 19.5% Undervalued
With Nexans last closing at €135.30 against a narrative fair value of €168.00, the current price sits well below what the most followed thesis implies, putting the recent pullback into sharper context.
The ongoing acceleration of global electrification, renewable energy adoption, grid modernization, and significant investments in infrastructure (especially in Europe and emerging markets) continue to drive strong organic growth in Nexans' Electrification, Power Grid, and Transmission segments, supporting a robust order backlog and increased revenue visibility for coming years.
Want to see how this electrification push translates into hard numbers for Nexans? The narrative is based on a detailed mix of earnings, margins and long term revenue assumptions that you will only fully appreciate once you see the full model behind that €168 fair value call.
Result: Fair Value of €168.00 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Nexans still faces meaningful risks, particularly raw material cost swings in copper and aluminium, and execution challenges around acquisitions such as La Triveneta Cavi.
Find out about the key risks to this Nexans narrative.
Next Steps
With Nexans showing both potential rewards and clear risks, it may be useful to act promptly and test the thesis against your own view with 4 key rewards and 2 important warning signs
Looking for more investment ideas beyond Nexans?
If you find the Nexans story compelling, do not stop here. Broaden your watchlist with other focused ideas so you are not relying on a single opportunity.
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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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