Energy companies, such as Seadrill Partners, trading at a market price below their true values are considered to be undervalued. There’s a few ways you can determine how much a company is actually worth. The most popular methods include discounting the company’s cash flows it is expected to create in the future, or comparing its price to its peers or the value of its assets. The discrepancy between the price and value means investors have an opportunity to buy shares at a discount. Below are the stocks I believe are undervalued on all criteria, based on their latest financial data.
Seadrill Partners LLC (NYSE:SDLP)
Seadrill Partners LLC owns, operates, and acquires offshore drilling units in the United States, Angola, Thailand, Canada, Equatorial Guinea, Nigeria, Indonesia, Ghana, and internationally. Formed in 2012, and now run by Mark Morris, the company size now stands at 1,199 people and with the company’s market capitalisation at USD $305.77M, we can put it in the small-cap stocks category.
SDLP’s stock is currently floating at around -88% lower than its actual value of $27.86, at a price of US$3.28, according to my discounted cash flow model. This discrepancy gives us a chance to invest in SDLP at a discount. What’s even more appeal is that SDLP’s PE ratio is currently around 2.13x while its Energy Services peer level trades at, 25.92x meaning that relative to its comparable set of companies, SDLP’s shares can be purchased for a lower price. SDLP also has a healthy balance sheet, as current assets can cover liabilities in the near term and over the long run. It’s debt-to-equity ratio of 125.72% has been diminishing for the past few years signalling SDLP’s capability to pay down its debt. Interested in Seadrill Partners? Find out more here.
Capital Product Partners L.P. (NASDAQ:CPLP)
Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. Capital Product Partners was started in 2007 and with the company’s market capitalisation at USD $399.43M, we can put it in the small-cap stocks category.
CPLP’s shares are currently trading at -75% below its true level of $12.33, at the market price of US$3.09, based on my discounted cash flow model. This mismatch indicates a chance to invest in CPLP at a discounted price. CPLP is also strong in terms of its financial health, as short-term assets amply cover upcoming and long-term liabilities. The stock’s debt-to-equity ratio of 50.80% has been diminishing over the past couple of years showing its capacity to pay down its debt. Continue research on Capital Product Partners here.
Green Plains Partners LP (NASDAQ:GPP)
Green Plains Partners LP provides fuel storage and transportation services. The company was established in 2015 and with the company’s market cap sitting at USD $540.80M, it falls under the small-cap category.
GPP’s stock is now hovering at around -47% less than its actual value of $32.02, at the market price of US$16.85, based on my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. In addition to this, GPP’s PE ratio is trading at around 9.29x while its Oil and Gas peer level trades at, 13.51x implying that relative to its competitors, you can purchase GPP’s stock for a lower price right now. GPP is also in great financial shape, as current assets can cover liabilities in the near term and over the long run. More on Green Plains Partners here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.