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Despite 63% Rise In 2015, Teekay Tankers Stock Is Still Attractive

Teekay Tankers, the world’s largest operator of mid-sized tankers, is continuing to benefit from the strength in the tanker market.

Regarding its valuation metrics, TNK stock is undervalued; its forward P/E is extremely low at 5.31, the fourth lowest among all 177 Russell 3000 energy stocks.

Although TNK stock is already up 62.6% year-to-date, in my opinion, the stock still has more room to grow, and it is a Buy right now.

In my previous article about Teekay Tankers (NYSE:TNK) from June 14, I explained that in contrast to oil and gas producers, oil shipping companies benefit from low oil prices. Cheap oil causes high demand from countries like China, where the government continues to fill the second stage of its strategic petroleum reserves. Also, cheap oil prices contribute to lower transporting costs. Another factor that contributes to the high demand for crude tankers is the fact that crude oil future contracts are in contango, which means that future contracts price for remote delivery is higher than the spot price. That causes using some tankers as storage for later delivery of the crude oil at a better price.

Teekay Tankers, the world's largest operator of mid-sized tankers, is continuing to benefit from the strength in the tanker market. TNK stock has gained another 9.6% since my article was published, and it is up 62.6% year-to-date. However, since the prices of oil continue low at least in the next few months, TNK should continue to prosper, and its stock could go higher.

Taking advantage of the strong spot tanker market, Teekay has decided to increase its fleet. On August 05, the company announced that it agreed to acquire 12 modern Suezmax tankers from Principal Maritime for $662 million. According to the company, acquiring on-the-water vessels, delivering at the right point in the tanker market cycle solidifies Teekay Tankers' position...


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