Is Ferrellgas Partners LP. (NYSE:FGP) Still A Cheap Utilities Stock?

Ferrellgas Partners LP. (NYSE:FGP), a US$302.28M small-cap, operates in the utilities industry which has experienced a host of challenges, including the ongoing maintenance of assets, as well as emerging issues such as increased desire by consumers for a role in energy management and conservation. Utilities analysts are forecasting for the entire industry, a strong double-digit growth of 11.54% in the upcoming year , and a strong near-term growth of 19.17% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the utilities sector right now. In this article, I’ll take you through the energy sector growth expectations, and also determine whether Ferrellgas Partners is a laggard or leader relative to its utilities sector peers. View our latest analysis for Ferrellgas Partners

What’s the catalyst for Ferrellgas Partners's sector growth?

Aging asset performance with increased expectations on reliability, and new entrants and disruptive technology, are just some of the few key disruption in utilities. In the previous year, the industry saw growth in the teens, beating the US market growth of 10.98%. Ferrellgas Partners leads the pack with its impressive earnings growth of 84.64% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Ferrellgas Partners poised to deliver a 69.17% growth over the next couple of years compared to the industry's 11.54%. This growth may make Ferrellgas Partners a more expensive stock relative to its peers.

Is Ferrellgas Partners and the sector relatively cheap?

Gas utility companies are typically trading at a PE of 19.74x, relatively similar to the rest of the US stock market PE of 18.11x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 11.85% on equities compared to the market’s 10.58%. Since Ferrellgas Partners’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Ferrellgas Partners’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

Ferrellgas Partners’s industry-beating future is a positive for investors. If Ferrellgas Partners has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the utilities industry. However, before you make a decision on the stock, I suggest you look at Ferrellgas Partners's fundamentals in order to build a holistic investment thesis.

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has FGP's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Ferrellgas Partners? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.