Recent performance snapshot

HA Sustainable Infrastructure Capital (HASI) has drawn fresh attention after a recent stretch where the stock is down about 3% over the past month but up roughly 10% over the past 3 months.

At a share price of $40.61, HASI’s recent pullback over the past month contrasts with a stronger 27.62% year to date share price return and a 69.49% total shareholder return over the past year, which indicates that momentum has been building over a longer horizon.

If this shift in sentiment around sustainable infrastructure has your attention, it can be useful to compare it with other potential opportunities through the Simply Wall St screener for 35 power grid technology and infrastructure stocks

With HA Sustainable Infrastructure Capital trading at $40.61, some indicators suggest the stock could be at a discount, but recent strong returns raise the question: is there still value left, or is future growth already priced in?

Preferred P/E of 96.2x: Is it justified?

On a P/E basis, HA Sustainable Infrastructure Capital looks expensive, with a P/E of 96.2x at a last close of $40.61, particularly when you compare it with both peers and the wider Diversified Financial industry.

The P/E ratio tells you how much investors are paying today for each dollar of current earnings. For a company focused on energy efficiency, renewable projects and other sustainable infrastructure, a high P/E can sometimes reflect expectations of stronger earnings ahead rather than current profitability.

In HASI’s case, analysts expect earnings to grow around 29.4% per year over the next three years and faster than the broader US market, which can help explain why the market is currently willing to accept a high P/E multiple. However, this 96.2x level is far above both the estimated fair P/E of 18.8x and the US Diversified Financial industry average of 17.9x, as well as a 9.4x peer average. Investors are therefore paying a substantial premium to what historical relationships and sector comparisons suggest may be more typical.

Compared with industry and peer benchmarks, the current P/E multiple stands at a much higher level. The fair P/E estimate indicates a level that market pricing could reasonably gravitate toward if expectations or sentiment change.

Result: Price-to-Earnings of 96.2x (OVERVALUED)

However, high expectations and a rich P/E can cut both ways. Any earnings disappointment or weaker appetite for sustainable assets can quickly pressure the stock.

Another view: DCF points the other way

While the 96.2x P/E suggests HA Sustainable Infrastructure Capital is expensive, the SWS DCF model paints a different picture. With a fair value estimate of $55.77 versus a share price of $40.61, the stock is indicated to be trading at about a 27% discount. Which signal matters more for you?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out HA Sustainable Infrastructure Capital for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 48 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With such a mixed picture on valuation and sentiment, it helps to see the underlying data and form your own stance rather than rely on headlines. To weigh the potential upside against the concerns raised by the market, take a closer look at the 3 key rewards and 3 important warning signs.

Looking for more investment ideas?

If you stop with just one stock, you could miss other opportunities that better fit your goals, risk comfort and income needs using the Simply Wall St screener.

• Target quality at a discount by checking companies highlighted in the 48 high quality undervalued stocks, which combine appealing prices with strong underlying fundamentals.
• Strengthen the defensive side of your portfolio by reviewing the 69 resilient stocks with low risk scores, which focuses on stocks with more resilient risk profiles.
• Hunt for tomorrow’s standouts before they hit the headlines by scanning the screener containing 21 high quality undiscovered gems, which have solid metrics but less market attention right now.

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.