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Is Delek Logistics a Great Stock for Value Investors?
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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 - Free Report) 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:
PE Ratio
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 16.67, 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 19.95. If we focus on the stock’s long-term PE trend, the current level puts Delek Logistics’ current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Furthermore, the stock’s PE also compares favorably with the Zacks classified Oil and Gas - Production Pipeline sub-industry’s trailing twelve months PE ratio, which stands at 23.80. 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 15.15, which is tad lower than the current level. So we might say that forward earnings estimates are already incorporated in the company’s current share price.
P/S Ratio
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 about 2.03. This is a bit lower than the S&P 500 average, which comes in at 2.98 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.
As we can see, the stock is trading at its highest range for the time period from a P/S metric. This does not provide us with a conclusive direction as to the valuation of the stock.
Broad Value Outlook
In aggregate, Delek Logistics currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% 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.
For example, its P/CF ratio (another great indicator of value) comes in at 8.07, which is far better than the industry average of 9.39. Clearly, DKL is a solid choice on the value front from multiple angles.
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 ‘B’ and a Momentum score of ‘D’. This gives DKL a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen one estimate go lower in the past sixty days compared to no movement in the opposite direction, while the full year estimate has seen one up and one down over the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has fallen by roughly 2% in the past two months, while the full year estimate witnessed no changes. 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
Despite the somewhat bearish estimate revision trend, the stock has a long-term expected earnings growth of 6%. Furthermore, the stock sports a Zacks Rank #1 (Strong Buy) indicating robust fundamentals and expectations of outperformance in the near term.
Bottom Line
Delek Logistics is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 26%) and a solid Zacks Rank instills investor confidence.
However, it is hard to get too excited about this company overall as over the past two years, the Zacks Oil and Gas - Production Pipeline industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this robust value metrics, and we believe that we have a strong value contender in Delek Logistics.
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Is Delek Logistics a Great Stock for Value Investors?
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 - Free Report) 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:
PE Ratio
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 16.67, 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 19.95. If we focus on the stock’s long-term PE trend, the current level puts Delek Logistics’ current PE ratio above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Furthermore, the stock’s PE also compares favorably with the Zacks classified Oil and Gas - Production Pipeline sub-industry’s trailing twelve months PE ratio, which stands at 23.80. 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 15.15, which is tad lower than the current level. So we might say that forward earnings estimates are already incorporated in the company’s current share price.
P/S Ratio
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 about 2.03. This is a bit lower than the S&P 500 average, which comes in at 2.98 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.
As we can see, the stock is trading at its highest range for the time period from a P/S metric. This does not provide us with a conclusive direction as to the valuation of the stock.
Broad Value Outlook
In aggregate, Delek Logistics currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% 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.
For example, its P/CF ratio (another great indicator of value) comes in at 8.07, which is far better than the industry average of 9.39. Clearly, DKL is a solid choice on the value front from multiple angles.
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 ‘B’ and a Momentum score of ‘D’. This gives DKL a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen one estimate go lower in the past sixty days compared to no movement in the opposite direction, while the full year estimate has seen one up and one down over the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has fallen by roughly 2% in the past two months, while the full year estimate witnessed no changes. 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
Despite the somewhat bearish estimate revision trend, the stock has a long-term expected earnings growth of 6%. Furthermore, the stock sports a Zacks Rank #1 (Strong Buy) indicating robust fundamentals and expectations of outperformance in the near term.
Bottom Line
Delek Logistics is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 26%) and a solid Zacks Rank instills investor confidence.
However, it is hard to get too excited about this company overall as over the past two years, the Zacks Oil and Gas - Production Pipeline industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this robust value metrics, and we believe that we have a strong value contender in Delek Logistics.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>