Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
Occidental Petroleum (OXY) is a stock many investors are watching right now. OXY is currently sporting a Zacks Rank #2 (Buy) and an A for Value.
Another valuation metric that we should highlight is OXY’s P/B ratio of 1.63. The P/B ratio pits a stock’s market value against its book value, which is defined as total assets minus total liabilities. OXY’s current P/B looks attractive when compared to its industry’s average P/B of 1.93. Within the past 52 weeks, OXY’s P/B has been as high as 1.94 and as low as 1.27, with a median of 1.65.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a preferred metric because revenue can’t really be manipulated, so sales are often a truer performance indicator. OXY has a P/S ratio of 2.5. This compares to its industry’s average P/S of 2.99.
Finally, our model also underscores that OXY has a P/CF ratio of 4.59. This figure highlights a company’s operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company’s current P/CF looks solid when compared to its industry’s average P/CF of 5.47. Over the past year, OXY’s P/CF has been as high as 4.78 and as low as 3.32, with a median of 4.31.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Occidental Petroleum is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, OXY feels like a great value stock at the moment.
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This article originally published on Zacks Investment Research (zacks.com).
Source: finance.yahoo.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
