Star Gas Partners LP – Value Analysis (NYSE:SGU) : August 19, 2017

Capitalcube gives Star Gas Partners LP a score of 75.

Our analysis is based on comparing Star Gas Partners LP with the following peers – Suburban Propane Partners, L.P., AmeriGas Partners, L.P., Global Partners LP, Crestwood Equity Partners LP, UGI Corporation, Ferrellgas Partners, L.P., Delek US Holdings Inc and Sprague Resources LP (SPH-US, APU-US, GLP-US, CEQP-US, UGI-US, FGP-US, DK-US and SRLP-US).

Investment Outlook

Star Gas Partners LP has a fundamental score of 75 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It’s current Price/Book of 1.82 is about median in its peer group.
  • SGU-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • SGU-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • SGU-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • SGU-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • SGU-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

SGU-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 13.28% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 39.99%), and a well-cushioned interest coverage level of 7.25x, SGU-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 8 peers for the company have an outstanding debt balance.

SGU-US has maintained its Quick & Able profile from the recent year-end.

  • SGU-US‘s interest coverage has declined 2.65 points from last year’s high but remains above its five-year average interest coverage of 6.21.
  • Though its interest coverage decreased to 7.25x from 9.90x (in 2016), its peer median remained relatively stable during this period at 1.50x.
  • Interest coverage fell 2.82 points relative to peers. It is also above the 2.50x coverage benchmark unlike the peer median.
  • SGU-US‘s debt-EV is its lowest relative to the last five years and compares to a high of 45.24% in 2012.
  • While its debt-EV decreased to 13.28% from 18.95% (in 2016), its peer median increased during this period to 39.99% from 37.76%.
  • Relative to peers, debt-EV fell 7.91 percentage points. Unlike the peer median, it is also below the 25% leverage benchmark.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Suburban Propane Partners, L.P. 45.63 0.84 1.5 13.61
AmeriGas Partners, L.P. 38.48 0.84 1.81 14.45
Global Partners LP 68.33 1.59 1.4 4.27
Crestwood Equity Partners LP 39.99 1.13 1.13 18.92
UGI Corporation 33.76 1.22 3.62 23.97
Ferrellgas Partners, L.P. 79.01 0.93 0.77 5.73
Delek US Holdings Inc 39.87 1.5 -0.79 7.02
Sprague Resources LP 47.4 2.08 1.85 15.66
Star Gas Partners, L.P. 13.28 1.06 7.25 82.63
Peer Median 39.99 1.13 1.5 14.45
Best In Class 13.28 2.08 7.25 82.63

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Company Profile

Star Gas Partners LP operates as a home heating oil and propane distributor and services provider to residential and commercial customers. It also engages in the provision of heating and air conditioning equipment, as well as diesel, fuel, and gasoline products. The company was founded on October 16, 1995 and is headquartered in Stamford, CT.

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