GasLog Partners LP Stock Is Believed To Be Possible Value Trap
- By GF Value
The stock of GasLog Partners LP (NYSE:GLOP, 30-year Financials) is believed to be possible value trap, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $3.108 per share and the market cap of $157.3 million, GasLog Partners LP stock appears to be possible value trap. GF Value for GasLog Partners LP is shown in the chart below.
The reason we think that GasLog Partners LP stock might be a value trap is because GasLog Partners LP has an Altman Z-score of 0.35, which indicates that the financial condition of the company is in the distressed zone and implies a higher risk of bankruptcy. An Altman Z-score of above 2.99 would be better, indicating safe financial conditions. To learn more about how the Z-score measures the financial risk of the company, please go here.
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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. GasLog Partners LP has a cash-to-debt ratio of 0.08, which is worse than 79% of the companies in Oil & Gas industry. GuruFocus ranks the overall financial strength of GasLog Partners LP at 3 out of 10, which indicates that the financial strength of GasLog Partners LP is poor. This is the debt and cash of GasLog Partners LP over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. GasLog Partners LP has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $329.4 million and earnings of $0.94 a share. Its operating margin is 44.40%, which ranks better than 93% of the companies in Oil & Gas industry. Overall, the profitability of GasLog Partners LP is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of GasLog Partners LP over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of GasLog Partners LP is -8.1%, which ranks in the middle range of the companies in Oil & Gas industry. The 3-year average EBITDA growth rate is -16.8%, which ranks worse than 70% of the companies in Oil & Gas industry.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, GasLog Partners LP's return on invested capital is 6.10, and its cost of capital is 4.90. The historical ROIC vs WACC comparison of GasLog Partners LP is shown below:
In summary, The stock of GasLog Partners LP (NYSE:GLOP, 30-year Financials) gives every indication of being possible value trap. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 70% of the companies in Oil & Gas industry. To learn more about GasLog Partners LP stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
