Investors interested in stocks from the Transportation - Shipping sector have probably already heard of Teekay Tankers (TNK) and Kirby (KEX). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Teekay Tankers has a Zacks Rank of #1 (Strong Buy), while Kirby has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TNK has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
TNK currently has a forward P/E ratio of 2.84, while KEX has a forward P/E of 25. We also note that TNK has a PEG ratio of 0.95. 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 2.57.
Another notable valuation metric for TNK is its P/B ratio of 0.58. 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 1.34.
These are just a few of the metrics contributing to TNK's Value grade of B and KEX's Value grade of D.
TNK stands above KEX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TNK is the superior value option right now.