Today we're going to take a closer look at large-cap Industrials company Tenaris, whose shares are currently trading at $29.09. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Tenaris S.A., together with its subsidiaries, produces and sells seamless and welded steel tubular products and related services for the oil and gas industry, and other industrial applications. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 20.49 and an average price to book (P/B) ratio of 3.78. In contrast, Tenaris has a trailing 12 month P/E ratio of 6.7 and a P/B ratio of 2.5.
P/B ratios are calculated by dividing the company's market value by its equity's book value. Equity refers to all of the company's assets minus its liabilities. Traditionally, a P/B ratio of around 1 shows that a company is fairly valued, but owing to consistently higher valuations in the modern era, investors generally compare against sector averages.
When we divideTenaris's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.24, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.