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 Boardwalk Pipeline Partners, LP 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, Boardwalk Pipeline has a trailing twelve months PE ratio of 15.18, 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 20.06. If we focus on the long-term PE trend, Boardwalk Pipeline’s current PE level puts it below its midpoint of 17.45 over the past five years. Moreover, the current multiple stands well below the highs for the stock, suggesting that it could be a solid entry point.



Further, the stock’s PE also compares favorably with the Zacks classified Oils – Energy sector’s trailing twelve months PE ratio, which stands at 58.07. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers. 

We should also point out that Boardwalk Pipeline has a forward PE ratio (price relative to this year’s earnings) of just 13.69, so it is fair to say that a slightly more value-oriented path may be ahead for Boardwalk Pipeline stock in the near term too.

P/CF Ratio

An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.

The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.

In this case, Boardwalk Pipeline’s P/CF ratio of 7.33 is lower than the Zacks classified Oil/Gas Production Pipeline industry average of 12.04, which indicates that the stock is undervalued in this respect too.



Broad Value Outlook

In aggregate, Boardwalk Pipeline 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 Boardwalk Pipeline a solid choice for value investors.

What About the Stock Overall?

Though Boardwalk Pipeline 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 ‘C’ and a Momentum score of ‘B’. This gives BWP 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 upward revisions, while the full year estimate has seen two upward and no downward revisions in the same time period.

This has had a mixed impact on the consensus estimate, as the current quarter consensus estimate has slipped by 2.3% in the past two months, while the full year estimate has risen by 1.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

This indicates that though the company may face some challenges this quarter, its full year prospects appear promising. Thus, it boasts a Zacks Rank #2 (Buy), making us hopeful of outperformance in future.

Bottom Line

Boardwalk Pipeline is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Apart from a strong Zacks Rank, the company also flaunts a solid industry rank (Top 40% out of over 250 industries), thus highlighting that the broader factors remain favorable for the company. In fact, over the past one year, the Zacks classified Oil/Gas Production Pipeline industry has outperformed the broader market, as you can see below:



So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.

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