- By GF Value
The stock of GasLog Partners LP (NYSE:GLOP, 30-year Financials) is believed to be possible value trap, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $2.8 per share and the market cap of $141.7 million, GasLog Partners LP stock gives every indication of being possible value trap. GF Value for GasLog Partners LP is shown in the chart below.
The reason we think that GasLog Partners LP stock might be a value trap is because GasLog Partners LP has an Altman Z-score of 0.32, which indicates that the financial condition of the company is in the distressed zone and implies a higher risk of bankruptcy. An Altman Z-score of above 2.99 would be better, indicating safe financial conditions. To learn more about how the Z-score measures the financial risk of the company, please go here.
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. GasLog Partners LP has a cash-to-debt ratio of 0.08, which which ranks worse than 77% of the companies in Oil & Gas industry. The overall financial strength of GasLog Partners LP is 3 out of 10, which indicates that the financial strength of GasLog Partners LP is poor. This is the debt and cash of GasLog Partners LP over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. GasLog Partners LP has been profitable 6 years over the past 10 years. During the past 12 months, the company had revenues of $333.7 million and earnings of $0.52 a share. Its operating margin of 43.88% better than 94% of the companies in Oil & Gas industry. Overall, GuruFocus ranks GasLog Partners LP's profitability as fair. This is the revenue and net income of GasLog Partners LP over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. GasLog Partners LP's 3-year average revenue growth rate is in the middle range of the companies in Oil & Gas industry. GasLog Partners LP's 3-year average EBITDA growth rate is -16.8%, which ranks worse than 71% of the companies in Oil & Gas industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, GasLog Partners LP's ROIC was 6.05, while its WACC came in at 4.83. The historical ROIC vs WACC comparison of GasLog Partners LP is shown below:
In closing, the stock of GasLog Partners LP (NYSE:GLOP, 30-year Financials) is believed to be possible value trap. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 71% of the companies in Oil & Gas industry. To learn more about GasLog Partners LP stock, you can check out its 30-year Financials here.
To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.
This article first appeared on GuruFocus.