Tullow Oil plc (LSE:TLW), an energy company based in United Kingdom, saw a double-digit share price rise of over 10% in the past couple of months on the LSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Tullow Oil’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Tullow Oil
What is Tullow Oil worth?
Great news for investors – Tullow Oil is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is £2.88, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Tullow Oil’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Tullow Oil 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. Tullow Oil’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since Tullow Oil is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on Tullow Oil for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy Tullow Oil. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.