Yahoo Finance Why Kelt Exploration Ltd (TSX:KEL) Could Be A Buy
Kelt Exploration Ltd (TSX:KEL), an energy company based in Canada, saw a double-digit share price rise of over 10% in the past couple of months on the TSX. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at KEL’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for KEL
What's the opportunity in KEL?
According to my relative valuation model, KEL seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that KEL’s ratio of 1.4x is trading slightly below its industry peers’ ratio of 1.6x, which means if you buy KEL today, you’d be paying a relatively fair price for it. And if you believe that KEL should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that KEL’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of KEL look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares.Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for KEL, at least in the near future.
What this means for you:
Are you a shareholder? KEL seems fairly priced 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 KEL, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on KEL for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on KEL should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Kelt Exploration. You can find everything you need to know about KEL in the latest infographic research report. If you are no longer interested in Kelt Exploration, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
