Suburban Propane Partners LP (SPH, Financial) has been capturing attention with a daily gain of 5.11% and a notable 3-month increase of 24.33%. With an Earnings Per Share (EPS) of $1.92, investors are keen to understand if the current stock price reflects the company's intrinsic value. This article delves into the fair value of SPH, as estimated by GuruFocus' proprietary GF Value, to determine whether the stock is fairly valued and what this means for potential investors.
Company Overview
Suburban Propane Partners LP is a key player in the distribution of propane, fuel oil, and other refined fuels across the East and West Coast regions of the United States. It also engages in natural gas and electricity marketing within deregulated markets in New York and Pennsylvania. The company's operations are segmented into Propane; Fuel Oil and Refined Fuels; and Natural Gas and Electricity, with the Propane segment being the primary revenue generator. With a stock price of $18.1 and a GF Value of $16.46, we shall explore the alignment between SPH's market performance and its estimated fair value.
Understanding GF Value
The GF Value is a unique metric that determines the intrinsic value of a stock by considering its historical trading multiples, an adjustment factor based on past returns and growth, and future business performance forecasts. This value acts as a benchmark, suggesting where the stock price should ideally be. When the market price exceeds the GF Value Line, the stock might be overvalued, indicating potentially lower future returns. Conversely, if the price is below this line, the stock might be undervalued and could promise higher returns.
At the current price of $18.1, with a market cap of $1.20 billion, Suburban Propane Partners LP is deemed to be fairly valued according to the GF Value. This suggests that the long-term return of SPH stock is likely to align with the company's business growth rate.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoid capital loss. Suburban Propane Partners LP's financial strength is rated as 4 out of 10 by GuruFocus, primarily due to its cash-to-debt ratio ranking lower than the industry average. This indicates a weaker balance sheet compared to its peers.
Profitability and Growth
Profitability is a less risky investment criterion, and SPH's 10-year profitability record is impressive. With a revenue of $1.40 billion and an EPS of $1.92, the company's operating margin stands at 14.47%, which is competitive within the industry. This consistent profitability earns SPH a rank of 7 out of 10 in terms of profitability.
Growth is equally important. SPH's average annual revenue growth is 7.9%, which is moderate compared to industry standards. However, its 3-year average EBITDA growth is a modest 0.2%, indicating that there may be room for improvement.
ROIC vs. WACC
Comparing the Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) is another way to assess profitability. SPH's ROIC of 9.1 is higher than its WACC of 5.82, indicating effective capital allocation and value creation for shareholders.
Conclusion
In conclusion, Suburban Propane Partners LP is currently valued in line with its fair market value. Despite its solid profitability, the company's financial strength could be better, and its growth could be more robust. For a detailed exploration of SPH's financial history, you can review its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
