Golar LNG

Golar LNG Ltd is assigned a 5-star quantitative star rating, indicating our belief that this share class offers a compelling opportunity for investors. The stock currently trades at a 16% discount to our quantitative fair value estimate of $58.91 per share; however, some caution is warranted due to this estimate's medium uncertainty rating.

The firm's balance sheet strengthens our fair value estimate. 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 4.1, which ranks in the bottom 30% 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 firm's solid growth is an additional encouraging factor. Consistent revenue and earnings growth indicates a company's potential for increased market share and profitability. The firm's EBITDA per share growth, for example, lies in the top 20% compared with global peers. This suggests rapid margin expansion is underway, or new markets are being tapped, which further promotes our favorable price/fair value ratio.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has been a laggard relative to the broader universe over the past year. This underperformance makes the stock appear cheap, which portends a buying opportunity in light of other contributors to our model.

The company's narrow quantitative moat rating indicates it could outearn its cost of capital and maintain robust margins for 10 years or longer. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.