The stock of Green Plains Partners LP (NAS:GPP, 30-year Financials) is estimated to be modestly undervalued, 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 $11.57 per share and the market cap of $268.5 million, Green Plains Partners LP stock is believed to be modestly undervalued. GF Value for Green Plains Partners LP is shown in the chart below.
Because Green Plains Partners LP is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 2.3% 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. Green Plains Partners LP has a cash-to-debt ratio of 0.00, which which ranks in the bottom 10% of the companies in Oil & Gas industry. The overall financial strength of Green Plains Partners LP is 3 out of 10, which indicates that the financial strength of Green Plains Partners LP is poor. This is the debt and cash of Green Plains Partners LP over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Green Plains Partners LP has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $83.5 million and earnings of $1.76 a share. Its operating margin is 59.49%, which ranks better than 97% of the companies in Oil & Gas industry. Overall, GuruFocus ranks the profitability of Green Plains Partners LP at 8 out of 10, which indicates strong profitability. This is the revenue and net income of Green Plains 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 Green Plains Partners LP is 2.3%, which ranks in the middle range of the companies in Oil & Gas industry. The 3-year average EBITDA growth is 1.6%, which ranks in the middle range of the companies in Oil & Gas industry.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. 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. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Green Plains Partners LP's return on invested capital is 28.69, and its cost of capital is 6.44. The historical ROIC vs WACC comparison of Green Plains Partners LP is shown below:
To conclude, The stock of Green Plains Partners LP (NAS:GPP, 30-year Financials) shows every sign of being modestly undervalued. The company's financial condition is poor and its profitability is strong. Its growth ranks in the middle range of the companies in Oil & Gas industry. To learn more about Green Plains Partners LP stock, you can check out its 30-year Financials here.
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