As reflected at the current price of $27, what future Adams Resources & Energy operating performance is the market anticipating? To achieve average annual stock market performance of 9.0% over the next 6 years, Adams Resources & Energy shares will need to reach $45. Upper quartile performance will require a $52 Adams Resources & Energy stock price by 2028.
Executive Summary
- Adams Resources & Energy’s important characteristics: high expected growth, above average financial strength, instability, and low profitability. Growth is a big positive influence on Adams Resources & Energy’s valuation while Risk Profile is a big negative influence.
- Very low valuation, lagging shareholder returns. Current valuation levels are very low relative to the Adams Resources & Energy Peer Group. Recent market returns have substantially underperformed the Adams Resources & Energy Peer Group. Total shareholder returns expected to lag the overall equity market. Based on current investor expectations, Adams Resources & Energy shares should reach a level of $34 by 2028 — an 7.7% per year total shareholder return. A 2028 stock price of $45 would reflect median performance and a price of $52 would be required to reach upper quartile performance.
- Growth has been Adams Resources & Energy’s biggest valuation strength. Historical growth has been very high relative to the Adams Resources & Energy Peer Group and forecasted growth is relatively high. Asset Growth, and Revenue Growth have been superior. These factors have buoyed market perceptions of Adams Resources & Energy. Adams Resources & Energy’s historical income statement growth and balance sheet growth have diverged. Revenue growth has exceeded asset growth; earnings growth has paralleled equity growth and return on equity has been stable.
- Asset Turnover is group leading. Return on Equity is group lagging. The company has very low cash and will have to work to generate attractive investments and improve valuation.
- Adams Resources & Energy’s risk profile is unfavorable. Overall variability has been very high with very high revenue variability, above average E.P.S. variability, and relatively low stock price volatility. Financial Strength is relatively high and earnings’ expectations are relatively very high. The debt/capital ratio has risen very significantly.
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