Cheniere Energy Partners LP (CQP, Financial) experienced a daily gain of 4.74% and a 3-month gain of 26.58%. Its Earnings Per Share (EPS) stands at 7.48. These metrics naturally lead to the question: Is the stock modestly undervalued? In this article, we will delve into a detailed valuation analysis of Cheniere Energy Partners LP (CQP).
Company Introduction
Cheniere Energy Partners LP is the direct owner of the Sabine Pass LNG terminals and regasification facilities. The company also owns the Creole Trail Pipeline, which connects the terminal to third-party gas suppliers. Cheniere Partners shares in the marketing fees generated by Cheniere Marketing from Sabine Pass marketed gas volumes. The current stock price of $57.85 is compared against its GF Value of $66.11, indicating a potential undervaluation. This sets the stage for a deeper exploration of the company's intrinsic value.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally trade. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) at which the stock has traded.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
Cheniere Energy Partners LP (CQP, Financial) stock is estimated to be modestly undervalued based on the GuruFocus Value calculation. The stock's future return is likely to be higher than its business growth due to its relative undervaluation.
Financial Strength
Assessing the financial strength of a company is crucial before investing. Companies with poor financial strength pose a higher risk of permanent loss. Factors such as the cash-to-debt ratio and interest coverage can provide insights into a company's financial strength. Cheniere Energy Partners LP has a cash-to-debt ratio of 0.11, which is worse than 79.11% of 1034 companies in the Oil & Gas industry, indicating poor financial strength.
Profitability and Growth
Investing in profitable companies carries less risk. Companies demonstrating consistent profitability over the long term are particularly attractive. Cheniere Energy Partners LP has been profitable for 6 years over the past 10 years, with an operating margin of 37.19%, better than 80.69% of 984 companies in the Oil & Gas industry.
Growth is a critical factor in a company's valuation. Cheniere Energy Partners LP has a 3-year average annual revenue growth rate of 36% and a 3-year average EBITDA growth rate of 15.7%.
ROIC vs WACC
Comparing a company's Return on invested capital (ROIC) to the Weighted average cost of capital (WACC) is another method of assessing profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For Cheniere Energy Partners LP, the ROIC is 28.88, and the WACC is 6.46.
Conclusion
Overall, Cheniere Energy Partners LP (CQP, Financial) stock is estimated to be modestly undervalued. The financial condition of the company is poor, but its profitability is strong. Its growth ranks better than 51.87% of 829 companies in the Oil & Gas industry. For more information on Cheniere Energy Partners LP stock, check out its 30-Year Financials here.
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