Is Golar LNG Partners a Great Stock for Value Investors?

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Golar LNG Partners LP GMLP stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Golar LNG Partners has a trailing twelve months PE ratio of 7.65, as you can see in the chart below:

This level is significantly favorable with the market at large, as the PE for the S&P 500 compares in at about 19.89. If we focus on the stock’s long-term PE trend, the current level puts Golar LNG Partners’ current PE ratio only slightly below its midpoint over the past four years.

Further, the stock’s PE also is favorable with the Zacks classified Oils-Energy sector’s trailing twelve months PE ratio, which stands at 75.33. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers.

We should also point out that Golar LNG Partners has a forward PE ratio (price relative to this year’s earnings) of 9.29, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the near future.

PEG Ratio

While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.

Golar LNG Partners’ PEG ratio stands at just 1.18, compared with the Zacks Oil Refining & Marketing Mlp industry average of 2.53. This suggests a decent undervalued trading relative to its earnings growth potential right now.

Broad Value Outlook

In aggregate, Golar LNG Partners currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Golar LNG Partners a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the P/CF ratio (another great indicator of value) comes in at 4.35, which is better than the industry average of 6.71. Clearly, Golar LNG Partners is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Golar LNG Partners might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘D’ and a Momentum score of ‘F’. This gives Golar LNG Partners a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen two estimates go higher in the past sixty days and one lower, while the full year estimate has seen two upward revisions and no downward revision in the same time period.

This has had a clear impact on the consensus estimate, as the current quarter consensus estimate has risen by 4.4% in the past two months, while the full year estimate has risen by about 7.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

GOLAR LNG PARTN Price and Consensus

GOLAR LNG PARTN Price and Consensus | GOLAR LNG PARTN Quote

This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

Golar LNG Partners is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, despite a decent industry rank (top 35% out of 265 industries), a Zacks Rank #3, makes it hard to get too excited about this company overall. In fact, over the past two years, the Zacks Oil Refining & Marketing Mlp industry has clearly underperformed the broader market, as you can see below:

So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

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