Good Energy: Cheap stock to growth stock

In late 2023, we stumbled upon an opportunity that seemed too good to ignore.

Good Energy Group (LSE: GOOD), a UK-based renewable energy company, was trading at a price that suggested the market had either overlooked or misunderstood its true value.

With no significant debt and a market cap barely above its net-cash position, the stock was an obvious candidate for a deep-value play.

At the time, Good Energy was generating an average annual free cash flow of £7 million.

This meant that if we could buy the entire business at its market price, we’d recoup our investment in less than two years—a rare find for a cash-generating, publicly listed company.

Initiating the Position
Recognizing the opportunity, we initiated our first position in late 2023 at £2 per share. As the fundamentals continued to improve, so did our conviction.

By early 2024, Good Energy's free cash flow had increased to nearly £9 million annually. In response, we added to our position, raising our average entry price to £2.40 per share.

Valuation vs. Market Price
Our intrinsic valuation of the business was a conservative £5.50 per share.

With management executing a solid growth strategy, we were prepared to hold the stock for several years if needed.

The plan was simple: wait for the market to recognize the business's true worth and let it grow and expand in the meantime.

A Sudden Exit Opportunity
In November 2024, an unexpected turn came. Private equity firm Esyasoft approached Good Energy's board with an acquisition proposal.

After a lengthy due diligence process that stretched nearly 90 days, the offer was finalized at £4.90 per share.

Seeing minimal upside and a significant downside risk if the deal fell apart, we chose to exit our position at £4.80 per share—securing a 100% return in just one year.

Validating Our Valuation Method
The offer price aligning closely with our intrinsic valuation further validated our approach to assessing business value.

This investment was a textbook example of our strategy: find deeply undervalued companies, hold patiently, and exit when the risk-reward balance shifts.

This was a slightly different case because the business had all the hallmarks of a growth company, and we’re confident it’ll keep expanding under private ownership.