Should You Buy Shell Midstream Partners LP (SHLX) At $27.74?
Shell Midstream Partners LP (NYSE:SHLX), an energy company based in United States, received a lot of attention from a substantial price movement on the NYSE in the over the last few months, increasing to $28.49 at one point, and dropping to the lows of $25.32. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether SHLX’s current trading price of $27.74 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at SHLX’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Shell Midstream Partners
Is SHLX still cheap?
According to my relative valuation model, the stock is currently overvalued. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that SHLX’s ratio of 22x is above its peer average of 14.2x, which suggests the stock is overvalued compared to the oil, gas and consumable fuels industry. But, is there another opportunity to buy low in the future? Since SHLX’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much SHLX moves relative to the rest of the market.
Can we expect growth from SHLX?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. SHLX’s earnings over the next few years are expected to increase by 87.64%, 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? It seems like the market has well and truly priced in SHLX’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe SHLX should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on SHLX for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for SHLX, which means it’s worth diving deeper into other factors 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 Shell Midstream Partners. You can find everything you need to know about SHLX in the latest infographic research report. If you are no longer interested in Shell Midstream Partners, 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.
