Why UGI Corporation (NYSE:UGI) Could Be Worth Watching

UGI Corporation (NYSE:UGI), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a US$8.2b market cap stock, it seems odd UGI is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, 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 UGI’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for UGI

What's The Opportunity In UGI?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 19.03% above my intrinsic value, which means if you buy UGI today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $32.85, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since UGI’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.

Can we expect growth from UGI?

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. 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. Though in the case of UGI, 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? UGI seems fairly priced right now, 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 the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on UGI for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which 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 crystalize your views on UGI should the price fluctuate below its true value.

If you'd like to know more about UGI as a business, it's important to be aware of any risks it's facing. For example, UGI has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.