Is It The Right Time To Buy Inter Pipeline Ltd (TSE:IPL)?
Inter Pipeline Ltd (TSX:IPL), an energy company based in Canada, had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of CA$25.36 to CA$27.73. However, is this the true valuation level of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Inter Pipeline’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Inter Pipeline
Is Inter Pipeline still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.87x is currently trading slightly above its industry peers’ ratio of 16.18x, which means if you buy Inter Pipeline today, you’d be paying a relatively fair price for it. And if you believe that Inter Pipeline should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Furthermore, Inter Pipeline’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.
What does the future of Inter Pipeline look like?
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. Though in the case of Inter Pipeline, it is expected to deliver a negative earnings growth of -8.18%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, Inter Pipeline appears to be trading around its fair value, 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 Inter Pipeline, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on Inter Pipeline for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, 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 Inter Pipeline should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Inter Pipeline. You can find everything you need to know about Inter Pipeline in the latest infographic research report. If you are no longer interested in Inter Pipeline, 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.
