Is Now An Opportune Moment To Examine Eagle Bulk Shipping Inc. (NYSE:EGLE)?
Eagle Bulk Shipping Inc. (NYSE:EGLE), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$65.82 and falling to the lows of US$39.28. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Eagle Bulk Shipping's current trading price of US$39.28 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Eagle Bulk Shipping’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 Eagle Bulk Shipping
What's The Opportunity In Eagle Bulk Shipping?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 2.72x is trading slightly above its industry peers’ ratio of 2.44x, which means if you buy Eagle Bulk Shipping today, you’d be paying a relatively sensible 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 kind of growth will Eagle Bulk Shipping generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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? Currently, EGLE appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal 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 an eye 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 crystallize your views on EGLE should the price fluctuate below the industry PE ratio.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Eagle Bulk Shipping has 2 warning signs we think you should be aware of.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
