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Is SunCoke Energy a Great Stock for Value Investors?

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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 SunCoke Energy Partners, L.P.SXCP 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, SunCoke Energy has a trailing twelve months PE ratio of 9.30, 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 19.28. Further, if we focus on the long-term PE trend, SunCoke Energy's current PE level puts it slightly below its midpoint of 9.81 over the past few years. Moreover, the current level stands significantly below the highs for this stock, suggesting that this could be a solid entry point.

Further, the stock's PE is also considerably lower than the Zacks classified Oils - Energy sector's trailing twelve months PE ratio, which stands at 72.46. This indicates that the stock is largely undervalued right now, compared to its peers.

We should also point out that SunCoke Energy has a forward PE ratio (price relative to this year's earnings) of just 8.29, so it is fair to say that a slightly more value-oriented path may be ahead for SunCoke Energy stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock's price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, SunCoke Energy has a P/S ratio of about 1.14. This is quite lower than the S&P 500 average, which comes in at 2.88 right now, indicating that the stock is decently undervalued.

Broad Value Outlook

In aggregate, SunCoke Energy 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 SunCoke Energy a solid choice for value investors.

What About the Stock Overall?

While SunCoke Energy 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 SXCP a Zacks VGM score-or its overarching fundamental grade-of 'A'. (You can read more about the Zacks Style Scores here >> )

Well, the company's recent earnings estimates have been somewhat encouraging. Though the current quarter hasn't witnessed any estimate revisions in the past sixty days, the full year estimate has seen two upward and no downward revisions in the same time period.

This has had a meaningful impact on the consensus estimate, as the full year estimate has jumped 3% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:

SunCoke Energy Partners, L.P. Price and Consensus

SunCoke Energy Partners, L.P. Price and Consensus | SunCoke Energy Partners, L.P. Quote

However, this slightly positive trend has likely not yet been reflected in the stock, as we have just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance in the near term.

Bottom Line

Nonetheless, SunCoke Energy is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite having a Zacks Rank #3, the stock belongs to an industry which is ranked among the Top 24%, which indicates that broader factors are favorable for the company. Further, over the past one year, the Zacks categorized Coal industry has largely outperformed the broader market, as you can see below:

So, it might pay for value investors to delve deeper into the company's prospects, as fundamentals indicate that this stock could be a compelling pick.

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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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