While Safe Bulkers, Inc. (NYSE:SB) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NYSE, rising to highs of US$3.40 and falling to the lows of US$2.99. 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 Safe Bulkers' current trading price of US$3.23 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 Safe Bulkers’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Safe Bulkers

What's The Opportunity In Safe Bulkers?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 3.2x is currently trading in-line with its industry peers’ ratio, which means if you buy Safe Bulkers today, you’d be paying a relatively sensible price for it. In addition to this, it seems like Safe Bulkers’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Safe Bulkers look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Though in the case of Safe Bulkers, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, SB appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on SB, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SB for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on SB should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Safe Bulkers at this point in time. To help with this, we've discovered 4 warning signs (1 makes us a bit uncomfortable!) that you ought to be aware of before buying any shares in Safe Bulkers.

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

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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.