BG Group a 5-Star Stock After Share Price Weakness

Morningstar estimates suggest the market is dramatically undervaluing the potential of this LNG producer

Holly Cook 9 May, 2012 | 6:12PM
Facebook Twitter LinkedIn

Shares in BG Group (BG.) have suffered in recent days, since the oil, gas and liquefied natural gas producer reported results that were overshadowed by rising costs. But the cost overruns haven't impacted on Morningstar analysts' positive view of the company's outlook.

BG reported net profit more than doubled to $1.22 billion in the first quarter, thanks to strong sales of LNG in Japan, and Morningstar's Allen Good believes it is the firm's early entry into LNG that made it a leading player in the arena, positioning it to capitalise on growing demand for the fuel.

"We think BG will continue to deliver attractive returns by executing its strategy of connecting its low-cost resource base toi high-value markets," Good writes in his recently-updated investment thesis for the company.

Indeed, the share price weakness means that BG stock now carries a 5-star rating, implying that the market is currently undervaluing the shares compared to Morningstar's fair value estimate.

As always, there are potential risks involved. While the bulls highlight BG's operations in Brazil, Australia and Russia as solid revenue-generators, the bears point to the chance of depressed LNG prices in the future and risks associated with operating in emerging market countries.

Read Good's full report on BG here (requires Premium login). Not a Premium member? Get instant access to Morningstar research and other tools with a free 14-day trial.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures