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Safe Bulkers, Inc. (NYSE:SB), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$5.07 and falling to the lows of US$3.36. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Safe Bulkers' current trading price of US$3.47 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Safe Bulkers’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Safe Bulkers
What is Safe Bulkers worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 2.37x is currently trading slightly below its industry peers’ ratio of 2.48x, which means if you buy Safe Bulkers today, you’d be paying a decent price for it. And if you believe Safe Bulkers should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Safe Bulkers’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Safe Bulkers look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Safe Bulkers, it is expected to deliver a negative earnings growth of -6.2%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? SB seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on SB, take a look at whether its fundamentals have changed.