The stock market and the price of shares for every big and small company operating in the local and global markets have always been largely unpredictable. A large majority of the investors are unable to predict the trends, leading to either a jackpot or a considerable financial loss. However, there are some driving factors that make the prices of a stock for any company move up or down the ladder. The same is the case with the AGL share price, which has seen various ups and downs since the company was established in 1837. This article will discuss the two primary factors that have been a driving force for this price ever since, i.e., reasonably high quality of the share and relatively cheap stock value.
These two primary determinants have been discussed in detail in this article. Keep reading to get some valuable information. Also, if you have a habit of reading informative pieces of writing, keep visiting The Australia Time because we provide authentic news and information to help our readers.
Without further ado, let’s move on to the main topic.
Company Overview
AGL Energy Limited, originally known as Australia Gas Light Company, was established in 1837 and used to supply gas to towns in Australia. It now provides energy and other services to residential, commercial, and wholesale clients across the country. It has always made high profits, steadily increasing the AGL:ASX share price. Currently, the company’s business primarily revolves around generating 11,208 megawatts of electricity through fossil fuels, water, wind, and solar energy and supplying to consumers nationwide, serving more or less 4.2 million people.
Factors That Drive the AGL Share Price
Whenever an investor plans to invest in stocks, the two primary factors they consider are the quality and valuation of the shares. The price of AGL shares is also scrutinized and determined by these two factors. We have discussed how they’ve always influenced and driven the price. Keep reading.
High Quality
Quality has always been a major determinant of the price of any share. AGL Energy is one of Australia’s biggest and oldest companies, with a history dating back to 1837. The company is also one of the leading suppliers of gas and electricity in the country, with a customer base of around 4.2 million people. Moreover, it has been consistently reporting profits for the past few years, which gives it an edge over its competitors.
Above all, it passes 6 of the nine financial tests in the Piotroski F-Score, which suggests that the AGL:ASX share price is not high because the share is high-quality and would give any investor a good return. The Piotroski F-Score is a reliable and widely used test to determine the strength of a company’s financial position and the quality of its stocks. The nine criteria or metrics used in this are divided into three groups and are:
Profitability
- Return on Assets
- Operating Cash Flow
- Change in Return of Assets
- Accruals
Leverage, Liquidity, and Source of Funds
- Change in Leverage
- Change in Current Ratio
- Change in Number of Shares
Operating Efficiency
- Change in Gross Margin
- Change in Asset Turnover Ratio
Cheap Valuation
In simple words, valuation is nothing but the price you pay for a certain number of earnings or cash flows. A company is said to be undervalued if it is trading at a lower price than its intrinsic value and vice versa. The AGL share price has always been relatively low, which means that it has always been undervalued compared to its competitors. That is because the company has always had a strong history and fundamentals. It makes big profits, which have made it a safe investment despite its low price.
One of the most important and famous valuation measures that investors use to determine the intrinsic value is the Earnings Yield. It is the earnings per share in the last twelve months divided by the current value of the share. Earnings Yield compares the company’s profits and its market valuation, giving a total value of the stock. It is calculated in percentage, and anything around 5% is considered good. For AGL Energy Limited, it has remained around 20% since the beginning of 2022, which was around 16% at the beginning of 2021. A positive sign for the investors.
That was an overview of the company and the major determinants and driving forces for the AGL share price. We hope to have provided you with valuable information that could help you in many ways. If you’re eager to read and know more about the stock market, fashion, life, and technology, keep coming back to The Australia Time because we write about everything that interests you. Happy reading!
