At US$18.17, Is It Time To Put Star Bulk Carriers Corp. (NASDAQ:SBLK) On Your Watch List?

Star Bulk Carriers Corp. (NASDAQ:SBLK), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$21.38 and falling to the lows of US$17.05. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Star Bulk Carriers' current trading price of US$18.17 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Star Bulk Carriers’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 Star Bulk Carriers

What Is Star Bulk Carriers Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Star Bulk Carriers’s ratio of 4.23x is trading slightly above its industry peers’ ratio of 2.85x, which means if you buy Star Bulk Carriers today, you’d be paying a relatively reasonable price for it. And if you believe that Star Bulk Carriers should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Star Bulk Carriers’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Star Bulk Carriers?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by a double-digit 10% over the next couple of years, the outlook is positive for Star Bulk Carriers. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? SBLK’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at SBLK? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SBLK, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for SBLK, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Star Bulk Carriers has 3 warning signs we think you should be aware of.

If you are no longer interested in Star Bulk Carriers, 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.