Best Undervalued Energy Stocks in May
Natural Resource Partners and Global Partners are energy stocks on my list that are potentially undervalued. This means their current share prices are trading well-below what the companies are actually worth. There’s a few ways you can value a company. The most popular methods include discounting the company’s cash flows it is expected to create in the future, or comparing its price to its peers or the value of its assets. Analysing the most recent financial data, I’ve created a list of companies that compare favourably in all criteria, making them potentially good investments.
Natural Resource Partners L.P. (NYSE:NRP)
Natural Resource Partners L.P., through its subsidiaries, owns, operates, manages, and leases mineral properties in the United States. Founded in 2002, and headed by CEO Corbin Robertson, the company provides employment to 243 people and with the company’s market capitalisation at USD $391.73M, we can put it in the small-cap stocks category.
NRP’s shares are now hovering at around -23% less than its intrinsic value of $41.35, at the market price of US$32.00, according to my discounted cash flow model. This mismatch signals an opportunity to buy NRP shares at a discount. In terms of relative valuation, NRP’s PE ratio is trading at around 5.08x while its Oil and Gas peer level trades at, 14.14x meaning that relative to its competitors, NRP’s stock can be bought at a cheaper price. NRP is also strong in terms of its financial health, with short-term assets covering liabilities in the near future as well as in the long run. The stock’s debt-to-equity ratio of 152.14% has been falling over the past couple of years signalling NRP’s capacity to pay down its debt. Continue research on Natural Resource Partners here.
Global Partners LP (NYSE:GLP)
Global Partners LP, a midstream logistics and marketing company, distributes gasoline, distillates, residual oil, and renewable fuels to wholesalers, retailers, and commercial customers in the New England states and New York. Formed in 2005, and currently lead by Eric Slifka, the company size now stands at 2,000 people and with the market cap of USD $591.13M, it falls under the small-cap category.
GLP’s shares are now trading at -35% lower than its real value of $27.29, at a price tag of US$17.80, according to my discounted cash flow model. This difference in price and value gives us a chance to buy low. Additionally, GLP’s PE ratio stands at around 6.35x against its its Oil and Gas peer level of, 14.14x meaning that relative to its peers, GLP’s shares can be purchased for a lower price. GLP also has a healthy balance sheet, as near-term assets sufficiently cover liabilities in the near future as well as in the long run.
Interested in Global Partners? Find out more here.
KNOT Offshore Partners LP (NYSE:KNOP)
KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters in the North Sea and Brazil. KNOT Offshore Partners was founded in 2013 and with the stock’s market cap sitting at USD $671.18M, it comes under the small-cap stocks category.
KNOP’s stock is currently trading at -43% under its actual value of $36.35, at the market price of US$20.60, based on my discounted cash flow model. The discrepancy signals an opportunity to buy low. In addition to this, KNOP’s PE ratio stands at 10.05x compared to its Oil and Gas peer level of, 14.14x meaning that relative to its comparable set of companies, KNOP’s shares can be purchased for a lower price. KNOP is also a financially robust company, as short-term assets amply cover upcoming and long-term liabilities. The stock’s debt-to-equity ratio of 140.94% has been reducing for the past few years showing its capacity to pay down its debt. More on KNOT Offshore Partners here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.
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.
