Is TPG Specialty Lending (TSLX) 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 TPG Specialty Lending, Inc. (NYSE:TSLX) 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, TPG Specialty Lending has a trailing twelve months PE ratio of 9.9, 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 21.4. If we focus on the long-term PE trend, TPG Specialty Lending’s current PE level puts it almost on par with its mid-point over the last three years.

Further, the stock’s PE also compares highly favorably with its industry’s trailing twelve months PE ratio, which stands at 29.5. At the very least, this indicates that the stock is undervalued right now, compared to its peers.

We should also point out that TPG Specialty Lending has a forward PE ratio (price relative to this year’s earnings) of 9.9, which is in line with the current level. Hence the forward earnings estimates are already incorporated in the company’s current share price.

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, TPG Specialty Lending has a P/S ratio of 2.7. This is significantly lower than the industry average, which comes in at 5.7 right now.

If anything, this suggests some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, TPG Specialty Lending 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 TPG Specialty Lending a solid choice for value investors, and some of its other key metrics make this pretty clear too.

What About the Stock Overall?

Though TPG Specialty Lending 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 B and a Momentum score of A. This gives TSLX a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been encouraging. The current year has seen seven estimates going higher in the past sixty days compared to none lower, while the next year estimate has seen three up and two down in the same time period.

Therefore, the current year consensus estimate has increased by 4.7% in the past two months, while the next year estimate has inched up only by 1.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

TPG Specialty Lending, Inc. Price and Consensus

Even though TPG Specialty Lending has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.

Bottom Line

TPG Specialty Lending is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 17% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past six months, its industry has clearly 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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TPG Specialty Lending, Inc. (TSLX): Free Stock Analysis Report

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