A Trio of Capital-Intensive Stocks to Consider
- By Alberto Abaterusso
When looking for value opportunities amid companies operating in capital-intensive industries, investors should screen for stocks whose price to tangible book value ratios are appealing more than their competitors. This should assign a higher likelihood of uncovering value opportunities, in my opinion.
The price-to-tangible-book-value ratio is preferred to the price-book ratio, as the appraisal of these companies mainly derives from tangible assets.
Vermilion Energy Inc
The first stock that qualifies is Vermilion Energy Inc (NYSE:VET), a Canadian acquirer, explorer and developer of petroleum and natural gas resources in North America and internationally.
Vermilion Energy Inc has a price-to-tangible-book-value ratio of 0.5, which appeals more than the industry median of 0.83.
The stock price was $2.38 per share as of Sept. 25, while the tangible book value per share was approximately $4.80 as of the most recent quarter which ended on June 29.
The stock price performed poorly over the past year as it declined nearly 86%, determining a market capitalization of $377.21 million, while the 52-week range is $1.50 to $18.49.
GuruFocus assigned a financial strength rating of 2 out of 10 and a profitability rating of 6 out of 10 to the company.
The stock has a hold recommendation rating with an average target price of $2.38 per share on Wall Street.
Sappi Ltd
The second stock that makes the cut is Sappi Ltd (SPPJY), a South African global manufacturer and seller of paper and paper products.
Sappi Ltd.'s price-to-tangible-book-value ratio of 0.49 is more compelling than the industry median of 0.88.
As of Sept. 25, the stock price was $1.51 per American Depository Receipt (ADR), while the tangible book value per ADR was $3.06 as of the most recent quarter which ended on June 29.
The stock has declined by 39.6% over the past year for a market capitalization of $780.37 million and a 52-week range of $1.07 to $3.45.
GuruFocus assigned a financial strength rating of 4 out of 10 and a profitability rating of 6 out of 10 to the company.
The stock holds an overweight recommendation rating with an average target price of $219 per ADR on Wall Street.
Datang International Power Generation Co Ltd
The third stock that meets the criteria is Datang International Power Generation Co Ltd (DIPGY), a Chinese independent power generator and power plant developer in the People's Republic of China.
Datang International Power Generation Co Ltd's price-to-tangible-book-value ratio of 0.67 is more compelling than the industry median of 1.50.
The stock price was trading at $2.75 per American Depository Receipt (ADR) as of Sept. 25, while the tangible book value per ADR was $4.11 as of the most recent quarter which ended on June 29.
The stock did not perform well over the past 52 weeks as it fell by 33.3%, determining a market capitalization of $2.54 billion and a 52-week range of $2.45 to $4.27.
GuruFocus assigned a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10 to the company.
On Wall Street, the stock has a hold recommendation rating with an average target price of 8.05 Chinese yuan (about $1.18) per ADR.
Disclosure: I have no position in any security mentioned.
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This article first appeared on GuruFocus.
