Investors with an interest in Transportation - Shipping stocks have likely encountered both Scorpio Tankers (STNG) and Kirby (KEX). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Scorpio Tankers is sporting a Zacks Rank of #2 (Buy), while Kirby has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that STNG is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
STNG currently has a forward P/E ratio of 4.45, while KEX has a forward P/E of 20.97. We also note that STNG has a PEG ratio of 0.13. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. KEX currently has a PEG ratio of 1.75.
Another notable valuation metric for STNG is its P/B ratio of 1.08. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, KEX has a P/B of 1.45.
Based on these metrics and many more, STNG holds a Value grade of A, while KEX has a Value grade of C.
STNG sticks out from KEX in both our Zacks Rank and Style Scores models, so value investors will likely feel that STNG is the better option right now.
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