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Are Investors Undervaluing Sunoco LP (SUN) Right Now?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is Sunoco LP (SUN). SUN is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 11.37 right now. For comparison, its industry sports an average P/E of 15.95. Over the last 12 months, SUN's Forward P/E has been as high as 18.59 and as low as 9.92, with a median of 12.31.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. SUN has a P/S ratio of 0.18. This compares to its industry's average P/S of 0.26.

Finally, we should also recognize that SUN has a P/CF ratio of 6.68. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 9.10. Over the past 52 weeks, SUN's P/CF has been as high as 7.95 and as low as -136.49, with a median of 6.50.

These are only a few of the key metrics included in Sunoco LP's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, SUN looks like an impressive value stock at the moment.


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