When Should You Buy Eagle Bulk Shipping Inc. (NASDAQ:EGLE)?
Eagle Bulk Shipping Inc. (NASDAQ:EGLE), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Eagle Bulk Shipping’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Eagle Bulk Shipping
What's The Opportunity In Eagle Bulk Shipping?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Eagle Bulk Shipping’s ratio of 2.19x is trading slightly above its industry peers’ ratio of 2.16x, which means if you buy Eagle Bulk Shipping today, you’d be paying a relatively reasonable price for it. And if you believe Eagle Bulk Shipping should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Eagle Bulk Shipping’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Eagle Bulk Shipping look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Eagle Bulk Shipping, at least in the near future.
What This Means For You
Are you a shareholder? EGLE seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on EGLE, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on EGLE for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on EGLE should the price fluctuate below the industry PE ratio.
So while earnings quality is important, it's equally important to consider the risks facing Eagle Bulk Shipping at this point in time. For example, we've found that Eagle Bulk Shipping has 2 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Eagle Bulk Shipping, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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