Noble Midstream Partners LP (NYSE:NBLX), a US$2.04B mid-cap, is an oil and gas company operating in an industry which has endured an extended oil price slump since mid-2014. However, energy-sector analysts are forecasting for the entire industry, a strong double-digit growth of 19.63% in the upcoming year , and a massive growth of 49.48% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the oil and gas sector right now. Today, I will analyse the industry outlook, as well as evaluate whether Noble Midstream Partners is lagging or leading its competitors in the industry. See our latest analysis for Noble Midstream Partners
What’s the catalyst for Noble Midstream Partners’s sector growth?
The oil price collapse drove a negative 40% growth in the energy sector in the past five years. Global oil and gas companies cut capital expenditures by about 40% during 2014 and 2016, and as part of this cost cutting initiative, some 400,000 workers were let go, with major projects cancelled or deferred. Only now has the sector begun to emerge from its turmoil, and over the past year, the industry turnaround led to growth in the twenties, beating the US market growth of 13.60%. Noble Midstream Partners leads the pack with its impressive earnings growth of over 100% last year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be -1.76% compared to the wider energy sector growth hovering in the teens next year.
Is Noble Midstream Partners and the sector relatively cheap?
Oil and gas companies are typically trading at a PE of 14.47x, in-line with the US stock market PE of 18.35x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 11.31% on equities compared to the market’s 11.18%, potentially illustrative of a turnaround. On the stock-level, Noble Midstream Partners is trading at a PE ratio of 12.02x, which is relatively in-line with the average oil and gas stock. In terms of returns, Noble Midstream Partners generated 16.14% in the past year, which is 4.83% over the oil and gas sector.
If Noble Midstream Partners has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is an energy industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the energy sector. However, before you make a decision on the stock, I suggest you look at Noble Midstream Partners’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has NBLX’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Noble Midstream Partners? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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.