At $1.17, Is It Time To Buy Jones Energy Inc (NYSE:JONE)?
Jones Energy Inc (NYSE:JONE), an energy company based in United States, received a lot of attention from a substantial price increase on the NYSE over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Jones Energy’s outlook and valuation to see if the opportunity still exists. View our latest analysis for Jones Energy
What’s the opportunity in Jones Energy?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Jones Energy’s ratio of 0.25x is trading slightly below its industry peers’ ratio of 1.33x, which means if you buy Jones Energy today, you’d be paying a relatively reasonable price for it. And if you believe that Jones Energy should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Jones Energy’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Jones Energy look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Jones Energy’s earnings over the next few years are expected to increase by 59.29%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? JONE’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at JONE? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on JONE, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for JONE, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Jones Energy. You can find everything you need to know about Jones Energy in the latest infographic research report. If you are no longer interested in Jones Energy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
