Genesis Energy

Genesis Energy LP is assigned a 4-star quantitative star rating, indicating our belief that this share class offers a somewhat attractive opportunity for investors. The stock currently trades at a 23% discount to our quantitative fair value estimate of $18.48 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The company's balance sheet increases our estimated valuation. Leverage can enable a company to invest in growth, potentially boosting shareholder value more than equity financing alone. Reflecting the firm's leverage is its EBITDA/interest coverage ratio of 2.5, which sits in the bottom 30% compared with peers globally. Although the firm's ability to cover interest payments with EBITDA is limited, shares could sharply rebound if economic circumstances change or recent investments reduce fears of default. We believe this is a sign that shares could be cheap.

The company's valuation metrics are an additional encouraging factor. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's enterprise value to EBITDA ratio of 9.4, for example, ranks in the bottom 40% compared with peers globally. Relative to the company's EBITDA, the enterprise value of the business is low, which further promotes our favorable price/fair value ratio.

With its quantitative economic moat rating of none, this business is unlikely to consistently outearn its cost of capital without structural protection from competition. Additionally, the firm's moderate financial health score suggests it is acceptably positioned against adverse economic circumstances.