If you want to increase your likelihood to unearth opportunities in capital-intensive industries, one method is to scan the market for stocks that are topping their competitors in terms of superior price-to-tangible-book-value ratios.
The price-to-tangible-book-value ratio is preferred to the price-book ratio as a valuation ratio for capital-intensive companies, as the assessment of these businesses mainly derives from tangible or hard assets.
Gevo Inc
The first stock that holds the above criteria is Gevo Inc (GEVO, Financial), an Englewood, Colorado-based renewable fuels producer.
Gevo Inc has a price-to-tangible-book-value ratio of 0.3, which is more compelling than the industry median of 1.68.
As of Oct. 14, the stock price was $1.16 per share, while the tangible book value per share was approximately $3.87.
The stock price underperformed over the past year as it declined 57.7%, determining a market capitalization of $87.85 million, while the 52-week range is $0.46 to $3.18.
GuruFocus assigned a financial strength rating of 3 out of 10 and a profitability rating of 1 out of 10 to the company.
The stock has a buy recommendation rating with an average target price of $3.53 per share on Wall Street.
WPX Energy Inc
The second stock that has the criteria is WPX Energy Inc (WPX, Financial), a Tulsa, Oklahoma-based independent explorer and producer of oil and natural gas.
WPX Energy Inc's price-to-tangible-book-value ratio of 0.57 appeals more than the industry median of 0.86.
As of Oct. 14, the stock price was $4.77 per share, while the tangible book value per share was $8.37.
The stock has declined by 51.5% over the past year for a market capitalization of $2.68 billion and a 52-week range of $1.94 to $14.43.
GuruFocus assigned a score of 3 out of 10 for the financial strength rating and the profitability rating of the company.
The stock holds an overweight recommendation rating with an average target price of $8.69 per share on Wall Street.
Suncor Energy Inc
The third stock that makes the cut is Suncor Energy Inc (SU, Financial), a Canadian petroleum and gas integrated operator.
Suncor Energy Inc's price-to-tangible-book-value ratio of 0.74 is more appealing than the industry median of 0.86.
As of Oct. 14, the stock price traded at $12.37 per share, while the tangible book value per share was $16.72.
The stock price performance was quite disappointing for the shareholders over the past 52 weeks as it slumped 58.6%, determining a market capitalization of $18.85 billion and a 52-week range of $9.61 to $34.56.
GuruFocus assigned a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10 to the company.
The stock has a buy recommendation rating on Wall Street with an average target price of $21.85 per share.
Disclosure: I have no position in any security mentioned.
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