PBF Logistics LP (NYSE:PBFX), a US$968.1m small-cap, is an oil and gas company operating in an industry which has endured an extended oil price slump since mid-2014. However, Energy-sector analysts are forecasting for the entire industry, a strong double-digit growth of 22.4% in the upcoming year , and a whopping growth of 72.7% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Is the oil and gas industry an attractive sector-play right now? In this article, I’ll take you through the energy sector growth expectations, as well as evaluate whether PBF Logistics is lagging or leading its competitors in the industry.
What’s the catalyst for PBF Logistics’s sector growth?
In the past five years, the energy industry growth has been negative 40%, resulting from the oil price crash. Only now has the sector begun turnaround, and in the prior year, saw growth in the twenties, beating the US market growth of 15.3%. PBF Logistics lags the pack with its negative growth rate of -5.9% over the past year, which indicates the company has been growing at a slower pace than its energy peers. Although PBF Logistics is poised to deliver a 9.4% growth next year, moving it from negative to positive territory, it still lags its industry average rate of growth of 22.4%.
Is PBF Logistics and the sector relatively cheap?
The energy sector’s PE is currently hovering around 12.34x, below the broader US stock market PE of 19.86x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Furthermore, the industry returned a higher 13.1% compared to the market’s 10.6%, potentially illustrative of a turnaround. On the stock-level, PBF Logistics is trading at a PE ratio of 10.95x, which is relatively in-line with the average energy stock. In terms of returns, PBF Logistics generated 72.6% in the past year, which is 59.5% over the energy sector.
If PBF Logistics has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is an energy industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the energy sector. However, before you make a decision on the stock, I suggest you look at PBF Logistics’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has PBFX’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of PBF Logistics? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.