Is Buckeye Partners (BPL) 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 Buckeye Partners, L.P. BPL 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, Buckeye Partners has a trailing twelve months PE ratio of 14.50, 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 stands at about 21.12. If we focus on the long-term PE trend, Buckeye Partners’ current PE level puts it below its midpoint of 20.08 over the past five years. In fact, the current level stands close to the lows for the stock, suggesting that it could be a superb entry point.

Further, the stock’s PE compares favorably with the Zacks Oils - Energy sector’s trailing twelve months PE ratio, which stands at 28.47. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
 

We should also point out that Buckeye Partners has a forward PE ratio (price relative to this year’s earnings) of just 13.75, so it is fair to say that a slightly more value-oriented path may be ahead for Buckeye Partners stock in the near term too.

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, Buckeye Partners has a P/S ratio of about 1.87. This is much lower than the S&P 500 average, which comes in at 3.35 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.

Broad Value Outlook

In aggregate, Buckeye Partners currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Buckeye Partners a solid choice for value investors.

What About the Stock Overall?

Though Buckeye Partners 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 Score of D and a Momentum Score of B. This gives BPL 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 quite discouraging. The current quarter and full year estimates have seen three and one downward revisions in the past thirty days compared to one upward revisions.

This has had a negative impact on the consensus estimate, as the current quarter consensus estimate has declined by 4.4% over the past month, while the full year estimate has inched lower by 1.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Buckeye Partners L.P. Price and Consensus
 

Buckeye Partners L.P. Price and Consensus | Buckeye Partners L.P. Quote

Given this bearish trend, the stock has just a Zacks Rank #3 (Hold), which indicates why we are looking for in-line performance from the company in the near term.

Bottom Line

Buckeye Partners 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 Zacks Industry Rank (among Bottom 33% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:

So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

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