Energy company CrossAmerica Partners (CAPL) performed well in the latest quarter and fiscal year 2022. Given the rise in oil prices and the bright outlook for the energy industry, CAPL could be a good buy. The stock is rated A (Recommended Buy) in our proprietary rating system. Keep reading.
Amid continued macroeconomic headwinds, the stock market is expected to remain volatile. In an effort to increase the likelihood of successful investing, StockNews.com has developed Power Ratingsone of the most comprehensive stock pricing systems available to investors today.
PoWR ratings are calculated based on 118 different factors, each of which is optimally weighted. In this article, I will talk about the prospects for the shares of CrossAmerica Partners LP (KPL), which has an overall rating of A in our POWR rating system.
Oil prices rose after OPEC and its allies unexpectedly announced on Sunday that reduction in oil production by more than 1 million barrels per day starting from May. Yesterday, after the announcement, the S&P 500 energy index showed the most impressive results in six months.
CAPL reported strong fourth-quarter and fiscal 2022 results that beat both consistent revenue and earnings-per-share estimates. Its wholesale fuel margin has grown due to the implementation of strategic initiatives and higher variable margins.
The power company expanded its business efficiently and made higher profits. CAPL’s revenue and earnings per share have increased by an average of 31.4% and 47.4% over the past three years. During the same period, the company also recorded EBIT and net income growth of 41.9% and 52.2% CAGR respectively.
The company offers reliable dividends. In January, CAPL’s general partner approved a quarterly allocation of $0.5250/unit relating to the fourth quarter of 2022 (annualized $2.10/unit).
Its annual dividend is 9.77% of the current share price. The company’s average four-year return is 11.9%.
Last November, CAPL completed the acquisition of some public service station assets for $27.5 million plus working capital. Assets include contracts for wholesale fuel supply to 38 dealer locations, 35 additional accounts and two commission outlets, which together supply approximately 75 million gallons of fuel annually through various fuel grades.
The acquisition was financed with cash and unused capacity under a revolving line of credit and is expected to provide immediate benefit to the distribution of cash flows to the limited partners.
The stock is up 15% in the last six months and 8.4% in the last three months, ending its latest trading session at $21.57.
Here are the factors that may affect CAPL performance in the near term:
Solid Finance
During the fiscal fourth quarter ended December 31, 2022, CAPL’s operating revenue increased 4.4% year-over-year to $1.12 billion. Gross profit rose 14.8% year-over-year to $93.27 million. The company’s net profit available to partners increased by 37.7% compared to last year and amounted to $16.50 million.
In addition, its adjusted EBITDA increased 19.7% year-on-year to $44.28 million, while earnings per share were $0.43, up 34.4% year-on-year.
Discounted valuation
In terms of forward P/E, the CAPL of 24.15x is 50.9% lower than the five-year average of 49.17x. The EV/EBITDA target of 10.99x is 2.9% lower than the five-year average of 11.32.
In addition, its EV/Sales and P/S forward multiples of 0.39 and 0.18 are 26.6% and 27.7% below the five-year averages of 0.53 and 0.25.
Impressive Profitability
The last 12-month CAPL free cash flow margin of 2.45% is 22.4% higher than the five-year average of 2%. His last 12 month EBIT Margins of 2.11% are 19.4% higher than the five-year average of 1.77%.
Its ROCE, ROTC and ROTA of 113.15%, 5.97% and 5.08% are 159.4%, 78.1% and 26.5% higher than their respective five year averages of 43.62% , 3.35% and 3.98%.
POWR ratings reflect promising outlook
The strong fundamentals of CAPL are reflected in the PoWR rankings. The stock has an overall rating of A, which is a strong buy in our proprietary rating system.
Our proprietary rating system also ranks each stock in eight different categories. The shares are rated ‘A’ for performance, in line with their stable price performance in recent months.
It also has a B rating for stability, which is in line with its 24-month beta of 0.48.
In stock 31 MLP – Oil and Gas industry, it ranks first. The industry is rated A.
Click here to see additional POWR ratings for CAPL (growth, value, quality and sentiment).
Bottom line
CAPL is currently trading above its 50-day and 200-day moving averages of $21.41 and $20.52 respectively, indicating an uptrend.
Moreover, in recent years, the company has steadily increased its revenue and profits and has been paying dividends steadily.
Also, given the solid outlook for the energy industry, this top-rated stock could be a good buy.
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CAPL shares were unchanged in premarket trading on Tuesday. Year-to-date, the CAPL is up 11.35% compared to the 7.87% gain in the benchmark S&P 500 over the same period.
About the author: Critique Sarmah
Her interest in risky tools and her passion for writing made Kritika an analyst and financial journalist. She has a BA in Commerce and is currently pursuing a CFA program. Through her fundamental approach, she aims to help investors identify untapped investment opportunities.
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