西部中游合伙

Western Midstream Partners LP is assigned a 4-star quantitative star rating, illustrating our stance that this share class offers a somewhat attractive opportunity for investors. The stock currently trades at a 4% discount to our quantitative fair value estimate of $47.40 per share, which is reinforced by this estimate's low uncertainty rating. We require the price/fair value ratio to move a certain amount before the star rating can change. This stability-enhancing buffer is in effect for this stock.

The company's profitability strengthens our estimated valuation. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. For example, the firm's EBIT margin of 44.2% lies in the top 10% compared with global peers. This company's ability to turn revenue into cash flow is bolstered by its solid EBIT margin, which is wider than peers. We believe this is a sign that shares could be cheap.

The firm's favorable dividend structure is an additional encouraging factor. Dividends represent a stable form of future cash flows returned to shareholders, reducing the perceived risk of a business. The firm's forward dividend yield of 8.3%, for example, sits in the top 10% compared with peers globally. Expected dividend payments over the coming year relative to the current share price are favorable, 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 outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

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.