Is There Now An Opportunity In UGI Corporation (NYSE:UGI)?

UGI Corporation (NYSE:UGI), might not be a large cap stock, but it saw a significant share price rise of 30% in the past couple of months on the NYSE. The company is now trading at yearly-high levels following the recent surge in its share price. As a well-established company, which tends to be well-covered 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? Today we will analyse the most recent data on UGI’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for UGI

What's The Opportunity In UGI?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. We’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 24.13x is currently well-above the industry average of 18.36x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since UGI’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will UGI 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. UGI's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? UGI’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe UGI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. 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 UGI for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for UGI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about UGI as a business, it's important to be aware of any risks it's facing. Be aware that UGI is showing 3 warning signs in our investment analysis and 1 of those is concerning...

If you are no longer interested in UGI, 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.