The stock of Oasis Midstream Partners LP (NAS:OMP, 30-year Financials) is believed to be modestly overvalued, 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 $22.34 per share and the market cap of $755.7 million, Oasis Midstream Partners LP stock shows every sign of being modestly overvalued. GF Value for Oasis Midstream Partners LP is shown in the chart below.
Because Oasis Midstream Partners LP is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 15.1% over the past five years.
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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. Oasis Midstream Partners LP has a cash-to-debt ratio of 0.01, which which ranks in the bottom 10% of the companies in Oil & Gas industry. The overall financial strength of Oasis Midstream Partners LP is 4 out of 10, which indicates that the financial strength of Oasis Midstream Partners LP is poor. This is the debt and cash of Oasis Midstream 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. Oasis Midstream Partners LP has been profitable 6 years over the past 10 years. During the past 12 months, the company had revenues of $347.9 million and earnings of $0.57 a share. Its operating margin of 52.32% better than 96% of the companies in Oil & Gas industry. Overall, GuruFocus ranks Oasis Midstream Partners LP's profitability as fair. This is the revenue and net income of Oasis Midstream Partners LP over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Oasis Midstream Partners LP is 15.1%, which ranks better than 80% of the companies in Oil & Gas industry. The 3-year average EBITDA growth is -6.9%, which ranks in the middle range of the companies in Oil & Gas industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average 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 return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Oasis Midstream Partners LP's ROIC is 18.39 while its WACC came in at 13.07. The historical ROIC vs WACC comparison of Oasis Midstream Partners LP is shown below:
In closing, the stock of Oasis Midstream Partners LP (NAS:OMP, 30-year Financials) shows every sign of being modestly overvalued. The company's financial condition is poor and its profitability is fair. Its growth ranks in the middle range of the companies in Oil & Gas industry. To learn more about Oasis Midstream Partners LP stock, you can check out its 30-year Financials here.
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