Genesis Energy (NYSE:GEL) has drawn attention after its recent trading performance, with a 5% decline over the past month and a 1% slip over the past three months prompting closer scrutiny of its fundamentals.

While the recent 1-month share price return of 4.75% and 3-month share price return of 1.04% are both negative, Genesis Energy’s 1-year total shareholder return of 54.33% and 5-year total shareholder return of about 3x suggest longer term momentum has so far remained stronger than the latest pullback.

If you are weighing how Genesis Energy fits alongside other holdings, this can be a good moment to broaden your watchlist with fast growing stocks with high insider ownership.

With the units trading at a discount of around 27% to the current analyst price target and an indicated intrinsic discount of about 68%, investors may reasonably ask whether Genesis Energy is undervalued at this level or whether the market is already pricing in its future growth.

Price-to-Sales of 0.6x: Is it justified?

On a P/S of 0.6x at the last close of US$15.25, Genesis Energy screens mixed, appearing cheap against peers yet expensive relative to its own fair ratio.

The P/S multiple compares the market value of the company to its revenue, which can be useful for businesses where earnings are currently negative but sales are material, such as midstream and related energy services.

For Genesis Energy, the current 0.6x P/S is described as good value compared with both the US Oil and Gas industry average of 1.4x and a peer group average of 3x. This implies the market is assigning a lower sales multiple than many comparable names. At the same time, the estimated fair P/S ratio of 0.3x suggests that, if pricing aligned with that fair ratio, there could be room for the multiple to compress further rather than stretch higher.

Relative to industry and peer benchmarks, the current 0.6x sits well below the 1.4x sector level and the 3x peer average, yet it stands well above the 0.3x fair P/S that regression analysis points to as a potential anchor level.

Result: Price-to-Sales of 0.6x (ABOUT RIGHT)

However, the recent 37.65% annual revenue contraction and net loss of US$160.47m indicate that weaker fundamentals could still challenge expectations embedded in the current valuation.

Another view from the SWS DCF model

While the 0.6x P/S ratio suggests Genesis Energy trades at a discount to industry peers, our DCF model points in a different direction. It indicates the units are trading at about a 68.5% discount to an estimated fair value of roughly US$48.39. That is a much steeper gap than the sales multiple alone implies, which raises a simple question: is the market overly cautious about future cash flows, or is the DCF too optimistic for a business with recent revenue contraction and ongoing losses?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Genesis Energy for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 884 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Genesis Energy Narrative

If you look at the numbers and reach a different conclusion, or just prefer to test your own assumptions, you can build a fresh view in minutes with Do it your way.

A great starting point for your Genesis Energy research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Ready to line up your next ideas?

If Genesis Energy is on your radar, do not stop there. Broaden your opportunity set by scanning other ideas that fit what you care about most.

• Target income first and shortlist companies using these 12 dividend stocks with yields > 3% that may offer yield-focused opportunities, with additional filters to refine what suits you.
• Chase potential mispricings and sort through these 884 undervalued stocks based on cash flows to see which companies currently screen as attractive on a cash flow basis.
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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.