Today we're going to take a look at the well-established The AES Corporation (NYSE:AES). The company's stock received a lot of attention from a substantial price increase on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on AES’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for AES

What's The Opportunity In AES?

The stock is currently trading at US$16.93 on the share market, which means it is overvalued by 33% compared to my intrinsic value of $12.72. This means that the opportunity to buy AES at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that AES’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from AES?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With revenues expected to grow by a double-digit 12% over the next couple of years, the outlook is positive for AES. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? AES’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe AES should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on AES for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for AES, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing AES at this point in time. At Simply Wall St, we found 2 warning signs for AES and we think they deserve your attention.

If you are no longer interested in AES, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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.