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Why UGI Corporation (NYSE:UGI) Could Be Worth Watching

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·3 min read
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While UGI Corporation (NYSE:UGI) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. As a US$9.7b market cap stock, it seems odd UGI is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Today I will analyse the most recent data on UGI’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for UGI

Is UGI still cheap?

Great news for investors – UGI is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.95x is currently well-below the industry average of 17.63x, meaning that it is trading at a cheaper price relative to its peers. UGI’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of UGI look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. 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. 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 UGI, at least in the near future.

What this means for you:

Are you a shareholder? Although UGI is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to UGI, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on UGI for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that UGI is showing 2 warning signs in our investment analysis and 1 of those doesn't sit too well with us...

If you are no longer interested in UGI, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.