Star Gas Partners LP – Value Analysis (NYSE:SGU) : May 5, 2017

Capitalcube gives Star Gas Partners LP a score of 72.

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 72 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It’s current Price/Book of 1.72 is about median in its peer group.
  • We classify SGU-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • SGU-US has a successful operating model with relatively high net profit margins and asset turns.
  • 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.
  • While SGU-US‘s revenues growth in recent years has been around the peer median, the stock’s below peer median P/E ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • 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 13.12% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 37.76%), and a well-cushioned interest coverage level of 9.97x, 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 is its highest relative to the last five years and compares to a low of 4.04x in 2012.
  • Compared to 2016, interest coverage has remained relatively stable for both the company (9.97x) and the peer median (1.36x).
  • SGU-US‘s debt-EV is its lowest relative to the last five years and compares to a high of 45.24% in 2012.
  • Though its debt-EV decreased to 13.12% from 18.95% (in 2016), its peer median remained relatively stable during this period at 37.76%.
  • Relative to peers, debt-EV fell 5.83 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. 37.76 0.72 1.36 11.76
AmeriGas Partners, L.P. 36.8 0.59 1.9 16.42
Global Partners LP 69.98 1.35 1.05 2.94
Crestwood Equity Partners LP 37.66 1.11 0.92 14.16
UGI Corporation 33.62 0.99 9.54 23.23
Ferrellgas Partners, L.P. 75.02 0.89 0.93 7.36
Delek US Holdings, Inc. 45.62 1.49 -1.42 9.92
Sprague Resources LP 51.46 1.45 2.1 6.74
Star Gas Partners, L.P. 13.12 1.02 9.97 81.99
Peer Median 37.76 1.02 1.36 11.76
Best In Class 13.12 1.49 9.97 81.99

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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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