Is Now An Opportune Moment To Examine Star Bulk Carriers Corp. (NASDAQ:SBLK)?

While Star Bulk Carriers Corp. (NASDAQ:SBLK) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$19.98 and falling to the lows of US$16.91. 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$18.40 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?

Star Bulk Carriers is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. 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 6.65x is above its peer average of 3.6x, which suggests the stock is trading at a higher price compared to the Shipping industry. Another thing to keep in mind is that Star Bulk Carriers’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What does the future of Star Bulk Carriers look like?

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. 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 -5.3% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Star Bulk Carriers. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? If you believe SBLK is currently trading above its peers, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on SBLK for some time, now may not be the best time to enter into the stock. Its price has risen beyond its industry peers, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for Star Bulk Carriers you should be mindful of and 1 of these doesn't sit too well with us.

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.

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

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.