Is There Value In These 3 Atlas Stocks?

by: Brian Gorban

One can look at unusual options activity, as I described here, to find potential investments. Another factor to look after is strong insider activity as I described here. Also, one time-tested strategy is to find stocks trading with favorable valuations such as these here, and the following stocks below:

1) Atlas Pipeline Partners (NYSE:APL) through its subsidiaries, engages in gathering and processing natural gas. The stock has fallen recently and pushed its yield up to 6.7%. It has a P/E just under 3x, but that was due largely to a one-time gain in the quarter ending Mar. 2011, so I wouldn't focus on that value metric.

However, it trades at a comparatively cheap 1.4x P/S, 1.2x P/B, and respectable 22% return on equity. I don't see how the company can maintain their current juicy dividend when it amounts to approximately $105M annually and only approximately $60M coming in as FCF. I think fellow energy player Duke Energy (NYSE:DUK) is a better buy, trading at close to 1.1x P/B and a little lower 5.1% dividend yield, but one that is only at a 64% payout ratio indicating a much safer yield. Moreover, American Electric Power (NYSE:AEP) has similar valuations trading at 1.2x P/S, 1.25x P/B, and 5.0% dividend yield with only a 60% payout ratio. I see more value in those names.

2) Atlas Air Worldwide (NASDAQ:AAWW) has fallen considerably creating a nice value opportunity. The company trades at 7.9x P/E, .6x EV/S, .8x P/B, 3.7x EV/EBITDA, and a strong net cash position of almost $55M. I think this company is a buy here along with their competitors Air Transport Services (NASDAQ:ATSG). ATSG trades at 8x P/E, .7x EV/S, .9x P/B, and 3.0x EV/EBITDA showing much the same value as AAWW. Fellow competitor Aercap Holdings (NYSE:AER) looks cheap on the surface trading at 5.8x P/E and.6x P/B, however has a huge debt load and relatively pricey 4.7x EV/S and 12.8x EV/EBITDA. I'd rather split my position between AAWW and ATSG.

3) Atlas Energy, L.P. (NYSE:ATLS) has started to show some value at these lower levels. Trading at 8.9x P/E, .9x P/S, 1.1x EV/S, and a nice 5.1% dividend yield that looks secure at the FCF payout ratio of approximately 75%, I think is worth a buy in this low return environment.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AAWW, ATSG, ATLS over the next 72 hours.