Have Investors Already Priced In Oil Search Limited’s (ASX:OSH) Growth?
Oil Search Limited (ASX:OSH), an energy company based in Papua New Guinea, saw a decent share price growth in the teens level on the ASX over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Oil Search’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for Oil Search
What’s the opportunity in Oil Search?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 6% above my intrinsic value, which means if you buy Oil Search today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is A$7.58, there’s only an insignificant downside when the price falls to its real value. Furthermore, Oil Search’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Oil Search?
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. Oil Search’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in Oil Search’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on Oil Search, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, 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 Oil Search. You can find everything you need to know about Oil Search in the latest infographic research report. If you are no longer interested in Oil Search, 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.
