What Does Safe Bulkers, Inc.'s (NYSE:SB) Share Price Indicate?

While Safe Bulkers, Inc. (NYSE:SB) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Safe Bulkers’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Safe Bulkers

What Is Safe Bulkers 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 Safe Bulkers’s ratio of 5.2x is trading in-line with its industry peers’ ratio, which means if you buy Safe Bulkers today, you’d be paying a relatively reasonable price for it. Furthermore, Safe Bulkers’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will Safe Bulkers generate?

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. Though in the case of Safe Bulkers, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, SB 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 SB, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SB 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. In addition to this, 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 gel your views on SB should the price fluctuate below the industry PE ratio.

If you'd like to know more about Safe Bulkers as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 4 warning signs for Safe Bulkers you should be mindful of and 1 of these is a bit concerning.

If you are no longer interested in Safe Bulkers, 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.