Genesis Energy (NYSE:GEL): Assessing Valuation as Shenandoah Facility Delivers First Oil and Growth Outlook Strengthens

Genesis Energy (NYSE:GEL) has kicked off production at its Shenandoah facility, marking an important step for the company. Shenandoah has delivered first oil, with initial wells performing at or above expectations.

See our latest analysis for Genesis Energy.

The momentum behind Genesis Energy’s stock is hard to ignore, with a year-to-date share price return of 42.27% reflecting optimism around new Gulf of Mexico projects and a turnaround strategy centered on ramping production and debt reduction. While the past month has seen the share price step back, the longer-term picture remains strong, as shown by a 306.63% five-year total shareholder return and continued investment in growth opportunities.

If Genesis’s renewed growth streak caught your attention, now is a perfect chance to discover fast growing stocks with high insider ownership.

With cash flows set to improve and ambitious Gulf projects underway, the question arises: is Genesis Energy’s current share price undervaluing its growth prospects, or is the market already factoring in future gains, leaving little room for upside?

Price-to-Sales Ratio of 0.6x: Is It Justified?

Genesis Energy’s shares currently trade at a price-to-sales (P/S) ratio of 0.6x, a level that stands out as significantly lower than its industry peers. With a last close price of $15.01, the stock offers relative valuation appeal on this measure.

The price-to-sales ratio measures what investors are willing to pay for each dollar of a company’s revenue. For Genesis Energy, this is particularly relevant given the company’s recent revenue volatility and ongoing turnaround efforts. A low P/S ratio can indicate the market anticipates continued challenges or remains skeptical of future sales growth, even amid operational progress.

Compared to the US Oil and Gas industry average P/S of 1.5x, Genesis Energy’s 0.6x suggests the stock trades at a notable discount. However, the estimated fair P/S ratio for Genesis Energy is 0.3x based on fundamental drivers. This implies the current multiple is still above fair value levels. If market sentiment changes, the multiple may compress further toward this benchmark.

Explore the SWS fair ratio for Genesis Energy

Result: Price-to-Sales of 0.6x (OVERVALUED)

However, if these trends persist, sustained revenue declines and ongoing net losses could cast doubt on Genesis Energy’s pace of recovery.

Find out about the key risks to this Genesis Energy narrative.

Another View: DCF Model Signals Undervaluation

Looking beyond sales multiples, our SWS DCF model takes a longer-term approach by estimating Genesis Energy's fair value based on projected future cash flows. Using this method, the stock is trading at a 63% discount to fair value. This suggests it could be significantly undervalued by the market.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Genesis Energy for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Genesis Energy Narrative

Keep in mind that you can always take a different perspective or dig deeper into the numbers yourself, shaping a narrative in just a few quick steps: Do it your way.

A great starting point for your Genesis Energy research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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