Tellurian Stock: Low Valuation Implies High Upside Potential

Tellurian (TELL), headquartered in Houston, Texas, was founded in 2016 and operates as a natural gas company in the industry. In the same year, the company entered into a merger with a petroleum-based company named Magellan.

The company’s primary focus remains to be on liquefied natural gas production projects, and it has shown tremendous success in this specific niche. The company is constantly evolving, introducing new technologies and methodologies to make LNG cost-efficient and transform the lives of those utilizing its products. Its first project, Driftwood LNG, has garnered significant success since its inception.

I am bullish on Tellurian as it has a very robust growth outlook, looks cheap relative to historical averages, and its consensus price target implies massive upside over the next year.

Strengths

Tellurian has a total of 102 full-time employees, all of whom are highly skilled in their respective fields and significantly contribute toward the company’s overall success. Tellurian has a strong brand presence and image in the market, and that has also helped it expand its business and enter into new partnerships globally.

Its focus on creating low-cost natural gas has proven to be advantageous for its investors and customers alike. Its 27.6 mtpa liquid natural gas export facility and its pipeline represent a well-developed portfolio of LNG and natural gas production, distribution, trading, and infrastructure.

Recent Results

According to Tellurian’s most recent results ended September 30, 2021, the company had a total cash and cash equivalents position worth $210.8 million. This is much higher than the ~$78 million for the same period last year. The total revenue for the last 12 months was $58.3 million. Revenue has been increasing, as this figure was $37.4 million for the year-ended 2020 and $28.8 million in 2019.

Although revenue has been uptrending, TELL has net losses of over $85 million in the last 12 months. However, it’s worth noting that this was a significant improvement from 2020’s net loss totaling $210.7 million.

Valuation Metrics

TELL stock looks inexpensive here as its forward EV/EBITDA ratio is just 2.2 times, and its forward EV/sales ratio is 9.9 times compared to its three-year average of 15.5 times. Meanwhile, analysts expect revenue to increase by 79.9% in 2022 and EBITDA to increase by 202% in 2022.

Wall Street’s Take

According to Wall Street analysts, TELL earns a Moderate Buy consensus rating based on one Buy and one Hold rating assigned in the past three months. The average Tellurian price target of $4.25 puts the upside potential at 71.7%.

Summary and Conclusions

TELL stock is being bolstered by strong growth momentum, which appears set to continue for the foreseeable future, according to analyst projections. On top of that, Wall Street analysts lean bullish on the stock here, and the average price target implies massive upside potential over the next year.

The energy sector is booming at the moment due to a reopening global economy and inflationary pressures. TELL’s focus on natural gas and natural gas liquids is a further boon as these commodities are much cleaner than oil and coal.

Last but not least, the stock looks quite attractively priced relative to its historical valuation multiples and even more so when factoring in the tremendous growth potential. As a result, it looks like it might be a good time for investors to add shares of the stock.

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