Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn't want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let's put PBF Logistics LP PBFX
stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks: PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock's current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, PBF Logistics has a trailing twelve months PE ratio of 8.77, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 21.10. If we focus on the long-term PE trend, PBF Logistics' current PE level puts it slightly below its midpoint of 9.06 over the past few years. Also, the current level stands well below the highs for the stock, suggesting that it could be a solid entry point.
Further, the stock's PE compares favorably with the Zacks Oils - Energy sector's trailing twelve months PE ratio, which stands at 28.43. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that PBF Logistics' forward PE is roughly same as its trailing twelve months value, so we might say that the forward earnings estimates are incorporated in the company's share price as of now. We define forward PE as current price relative to the Zacks Consensus Estimate for the current fiscal year. P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn't take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company's management, and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company's stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, PBF Logistics' P/CF ratio of 6.63 is lower than the Zacks Oil/Gas Production Pipeline industry average of 8.75, which indicates that the stock is undervalued in this respect. Broad Value Outlook
In aggregate, PBF Logistics currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes PBF Logistics a solid choice for value investors. What About the Stock Overall?
Though PBF Logistics might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score and Momentum Score of B, each. This gives PBFX a Zacks VGM score - or its overarching fundamental grade - of A. (You can read more about the Zacks Style Scores here >>
Meanwhile, the company's recent earnings estimates have quite mixed. The current quarter has seen two estimates go lower in the past sixty days compared to no upward revisions, while the full year estimate has seen one upward and downward revision each in the same time period.
This has had a mixed impact on the consensus estimate, as the current quarter consensus estimate has dropped by 4.7% in the past two months, while the full year estimate has increased 0.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
PBF Logistics LP Price and Consensus
PBF Logistics LP Price and Consensus | PBF Logistics LP Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
PBF Logistics is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish Zacks Industry Rank (among Bottom 32% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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