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As part of our ongoing series here at The Acquirer’s Multiple, each week we focus on one of the stocks from our Stock Screeners, and why it might be a deeply undervalued gem.

The stock this week is:

Scorpio Tankers Inc. (STNG)

Scorpio Tankers is a leading international provider of marine transportation for refined petroleum products. The company owns and operates a modern fleet of tankers, specializing in the transport of gasoline, diesel, and other clean petroleum products. With a focus on efficiency and operational excellence, Scorpio Tankers benefits from global energy demand and shipping market dynamics, positioning it as a key player in the midstream oil logistics sector.

One of the metrics we use in our screens is IV/P (Intrinsic Value to Price). Let us simplify what it means:

What is IV/P (Intrinsic Value to Price)?

IV/P tells you if a stock is a good deal based on how much value you’re getting for the price you pay.

The Calculation:

It combines a stock’s earning power, growth potential, and what it’s returning to shareholders (via dividends and buybacks) to calculate its Implied Value — what the business is worth based on its fundamentals.

The Interpretation:

IV/P greater than 1: You’re getting more value than you’re paying for — a potential bargain.
IV/P less than 1: You’re paying more than the business is worth — possibly overvalued.

If IV/P is very high, it signals the stock might be trading at a deep discount.

IV/P for Scorpio Tankers: 2.50

Scorpio Tankers currently has an IV/P of 2.50, meaning the stock’s implied value is calculated to be 2.5 times greater than its current price. Put another way:

For every $1 you invest, you’re potentially getting $2.50 of value.

That’s a substantial margin of safety, suggesting Scorpio Tankers may be significantly undervalued.

Supporting Metrics:

Buyback Yield (BB Yield): 19.50%
This reflects the company’s aggressive capital returns to shareholders through buybacks and dividends, indicating strong cash flow deployment.

Dividend Yield: 4.90%
A solid income component, providing shareholder returns alongside buybacks.

Free Cash Flow Yield: 42.77%
An exceptionally high FCF yield signals robust cash generation relative to market cap, a key indicator of financial health and sustainability.

Why Might Scorpio Tankers Be Undervalued?

1. Cyclical Industry Perception:
Tanker stocks are often viewed as volatile due to fluctuating shipping rates and oil demand, leading to potential mispricing despite strong fundamentals.

2. Limited Coverage:
As a niche player in the shipping sector, Scorpio Tankers may not receive as much analyst attention as larger energy or logistics companies, creating an opportunity for overlooked value.

3. Macroeconomic Uncertainty:
Broader concerns about global trade, fuel demand, or interest rates may overshadow the company’s strong cash flows and disciplined capital allocation.

Conclusion:

With an IV/P of 2.50, Scorpio Tankers (STNG) appears to be trading at a notable discount to its intrinsic value. Its combination of high cash flow generation, aggressive shareholder returns (19.50% BB Yield), and a strong position in refined product shipping makes it an intriguing opportunity for deep value investors. While market sentiment around shipping stocks may remain mixed, Scorpio Tankers’ financial strength and capital return policies suggest significant upside potential if the market recognizes its true worth.

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