What Is Golden Ocean Group Limited's (NASDAQ:GOGL) Share Price Doing?

Golden Ocean Group Limited (NASDAQ:GOGL), is not the largest company out there, but it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Golden Ocean Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Golden Ocean Group

What's The Opportunity In Golden Ocean Group?

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. 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 3.98x is currently trading slightly above its industry peers’ ratio of 2.29x, which means if you buy Golden Ocean Group today, you’d be paying a relatively sensible price for it. And if you believe that Golden Ocean Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Golden Ocean Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Golden Ocean Group look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 a negative profit growth of -8.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Golden Ocean Group. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, GOGL 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 beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on GOGL, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on GOGL 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 GOGL 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. Be aware that Golden Ocean Group is showing 3 warning signs in our investment analysis and 1 of those is concerning...

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

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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.