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Is Now The Time To Look At Buying Genco Shipping & Trading Limited (NYSE:GNK)?

Genco Shipping & Trading Limited (NYSE:GNK), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$19.69 and falling to the lows of US$13.10. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Genco Shipping & Trading's current trading price of US$13.10 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Genco Shipping & Trading’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Genco Shipping & Trading

Is Genco Shipping & Trading Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Genco Shipping & Trading’s ratio of 4.66x is trading slightly above its industry peers’ ratio of 2.2x, which means if you buy Genco Shipping & Trading today, you’d be paying a relatively reasonable price for it. And if you believe that Genco Shipping & Trading should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Genco Shipping & Trading’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Genco Shipping & Trading look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 24% over the next couple of years, the future seems bright for Genco Shipping & Trading. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? GNK’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at GNK? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

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Are you a potential investor? If you’ve been keeping tabs on GNK, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for GNK, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Genco Shipping & Trading, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Genco Shipping & Trading has 2 warning signs and it would be unwise to ignore them.

If you are no longer interested in Genco Shipping & Trading, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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