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Is PBF Logistics a Great Value Buy At the Current Levels?

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 LPPBFX 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 8.60, as you can see in the chart below:

This level actually compares pretty favorably with the market at large as well, as the PE for the S&P 500 stands at about 19.95. If we focus on the PE trend, PBF Logistics' current PE level puts it below its midpoint (which stands at 9.17) over the past two years and is also way below its high of 16.77 over the same time frame indicating that the stock is currently undervalued.

We should also point out that PBF Logistics has a forward PE ratio (price relative to this year's earnings) of 9.18, so it is fair to expect a slight increase in the company's share price in the near future.

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 5.69 is lower than the Zacks classified Oil/Gas Production Pipeline industry's average of 13.37, which indicates that the stock is somewhat undervalued at this point of time.

Broad Value Outlook

In aggregate, PBF Logistics currently has a Zacks Value Style 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, and some of its other key metrics make this pretty clear too.

For example, its P/S ratio (another great indicator of value) comes in at 2.07, which is better than the industry average of 2.18. Clearly, PBF Logistics is a solid choice on the value front from multiple angles.

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 grade of 'C' and a Momentum score of 'A'. 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 been mixed at best. The current quarter has seen two estimates go higher in the past sixty days compared to none lower, while the full year estimate has seen one upward and no downward revisions in the same time period.

This has had just a positive impact on the consensus estimate, as the current quarter consensus estimate has risen by 5.9% in the past two months, while the full year estimate has risen by 0.1% over the same time frame.

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

The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, PBF Logistics is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company's favor.

Bottom Line

PBF Logistics is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 26% out of more than 250 industries) further supports the growth potential of the stock.

However, it is hard to get too excited about this company overall as over the past two years, the Zacks classified Oil &Gas - Production Pipeline - MLB industry has clearly underperformed the broader market, as you can see below:

Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in PBF Logistics.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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