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 Delek Logistics Partners, LP DKL 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:
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, Delek Logistics has a trailing twelve months PE ratio of 14.9, 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 compares in at about 21.1. If we focus on the stock’s long-term PE trend, the current level puts Delek Logistics’ current PE ratio almost on par with its midpoint over the past five years.
Furthermore, the stock’s PE also compares favorably with its industry’s trailing twelve months PE ratio, which stands at 18.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Delek Logistics has a forward PE ratio (price relative to this year’s earnings) of just 13.7, so it is fair to say that a slightly more value-oriented path may be ahead for the stock in the near term too.
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, Delek Logistics has a P/S ratio of 1.4. This is lower than the S&P 500 average, which comes in at 3.3 right now. Also, as we can see in the chart below, this inline with the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Delek 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 Delek Logistics a solid choice for value investors, and some of its other key metrics make this pretty clear too.
What About the Stock Overall?
Though Delek 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 A and a Momentum score of B. This gives DKL 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 encouraging. The current year has seen one estimate go higher in the past thirty days compared to one movement in the opposite direction, while the next year estimate has seen two up and one down over the same time period.
As a result, the current year consensus estimate has increased 0.5% in the past month, while the next year estimates has moved up by 16%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Delek Logistics Partners, L.P. Price and Consensus
Delek Logistics Partners, L.P. Price and Consensus | Delek Logistics Partners, L.P. Quote
Even though Delek Logistics has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Delek Logistics is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 32%) and a Zacks Rank #3, it is hard to get too excited about this company overall. Also, over the past two years, iys industry has underperformed the broader market, as you can see below:
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Delek Logistics Partners, L.P. (DKL) : Free Stock Analysis Report
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