When Should You Buy RSP Permian Inc (NYSE: RSPP)?


RSP Permian Inc (NYSE: RSPP) investors have enjoyed seeing the stock price increase by 27.0% over the last month. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at the company’s expected growth and valuation based on its most recent financial data to see if there is further upside moving forward.

Is RSP Permian Still Cheap?

The stock seems fairly valued at the moment according to 6 separate valuation analyses. Shares are trading roughly 7% above its intrinsic value. This means if you were to buy RSP Permian today, you’d be paying a reasonable price for it. If you believe that the stock is really worth $45.65, then there isn’t much room for the share price to appreciate beyond where it’s currently trading.

RSP Permian Inc Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $69.87 42.8%
Peer Revenue Multiples $27.26 -44.3%
Peer EBITDA Multiples $34.91 -28.7%
10-yr DCF Growth Exit $49.80 1.8%
5-yr DCF Growth Exit $50.19 2.6%
Peer P/E Multiples $41.88 -14.4%
Average $45.65 -6.7%

Click on any of the analyses above to view the latest model with real-time data.

Although, there may be an opportunity to buy in the future. This is because RSP Permian’s beta(a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What Does The Future Of RSP Permian Look Like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.

RSP Permian projected net income chartsource: finbox.io data explorer

With net income expected to grow at an average rate of 35.9% over the next couple years, the future certainly appears bright for RSP Permian. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher stock valuation.

How This Impacts You

Many investors separate stocks into value and growth categories based on quantitative metrics. However, one of the most famous investors in the world views this as foolish. In Warren Buffett’s 1992 letter to Berkshire Hathaway shareholders, Buffett touches upon a subject at odds with much of the investment industry:

“Most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth.’ Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value.”

While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company’s value.

RSP Permian’s optimistic future growth appears to have been factored into the current share price with the stock now trading near its intrinsic value. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of RSP Permian, it may be worth holding off until the stock develops a wider margin of safety.

But before making an investment decision, I recommend you continue to research RSP Permian to get a more comprehensive view of the company by looking at:

Risk Metrics: what is RSP Permian’s asset efficiency? This ratio measures the amount of cash flow that a company generates from its assets. View the company’s asset efficiency here.

Valuation Metrics: what is RSP Permian’s EBITDA less CapEx multiple and how does it compare to its peers? This is a helpful multiple to analyze when comparing capital intensive businesses. View the company’s EBITDA less CapEx multiple here.

Efficiency Metrics: is management becoming more or less efficient in creating value for the firm? Find out by analyzing the company’s return on invested capital ratio here.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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