Are Investors Undervaluing Shell (SHEL) 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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is Shell (SHEL). SHEL is currently sporting a Zacks Rank #1 (Strong Buy), as well as an A grade for Value.

Investors should also recognize that SHEL has a P/B ratio of 1.14. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. SHEL's current P/B looks attractive when compared to its industry's average P/B of 2.15. Over the past year, SHEL's P/B has been as high as 1.24 and as low as 0.99, with a median of 1.12.

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. SHEL has a P/S ratio of 0.87. This compares to its industry's average P/S of 0.99.

Finally, investors should note that SHEL has a P/CF ratio of 5.43. 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 stock's P/CF looks attractive against its industry's average P/CF of 9.04. Over the past year, SHEL's P/CF has been as high as 5.67 and as low as 4.14, with a median of 4.86.

Investors could also keep in mind Vista Energy, S.A.B. de C.V. - Sponsored ADR (VIST), another Oil and Gas - Integrated - International stock with a Zacks Rank of #1 (Strong Buy) and Value grade of A.

Vista Energy, S.A.B. de C.V. - Sponsored ADR is trading at a forward earnings multiple of 5.57 at the moment, with a PEG ratio of 1.52. This compares to its industry's average P/E of 10.18 and average PEG ratio of 0.68.

Over the past year, VIST's P/E has been as high as 9.23, as low as 5.14, with a median of 7.04; its PEG ratio has been as high as 1.56, as low as 0.29, with a median of 0.69 during the same time period.

Additionally, Vista Energy, S.A.B. de C.V. - Sponsored ADR has a P/B ratio of 1.51 while its industry's price-to-book ratio sits at 2.15. For VIST, this valuation metric has been as high as 3.66, as low as 1.51, with a median of 2.91 over the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Shell and Vista Energy, S.A.B. de C.V. - Sponsored ADR are likely undervalued currently. And when considering the strength of its earnings outlook, SHEL and VIST sticks out as one of the market's strongest value stocks.

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This article originally published on Zacks Investment Research (zacks.com).

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