Are Investors Undervaluing BP (BP) Right Now?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company value investors might notice is BP (BP). BP is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 4.72. This compares to its industry's average Forward P/E of 6.97. BP's Forward P/E has been as high as 7.66 and as low as 3.94, with a median of 5.52, all within the past year.
We should also highlight that BP has a P/B ratio of 1.24. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.53. Over the past year, BP's P/B has been as high as 1.42 and as low as 0.96, with a median of 1.16.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. BP has a P/S ratio of 0.49. This compares to its industry's average P/S of 0.52.
Another great Oil and Gas - Integrated - International stock you could consider is Shell (SHEL), which is a # 2 (Buy) stock with a Value Score of A.
Shell is currently trading with a Forward P/E ratio of 4.94 while its PEG ratio sits at 0.52. Both of the company's metrics compare favorably to its industry's average P/E of 6.97 and average PEG ratio of 0.51.
SHEL's price-to-earnings ratio has been as high as 9.46 and as low as 4.40, with a median of 6.47, while its PEG ratio has been as high as 2.37 and as low as 0.48, with a median of 0.82, all within the past year.
Shell also has a P/B ratio of 0.99 compared to its industry's price-to-book ratio of 1.53. Over the past year, its P/B ratio has been as high as 1.31, as low as 0.91, with a median of 1.07.
These are just a handful of the figures considered in BP and Shell's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that BP and SHEL is an impressive value stock right now.
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