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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One company to watch right now is Occidental Petroleum (OXY). OXY is currently holding a Zacks Rank #2 (Buy) and a Value grade of A.
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. This company's current P/B looks solid when compared to its industry's average P/B of 1.73. OXY's P/B has been as high as 1.94 and as low as 1.27, with a median of 1.65, over the past year.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. OXY has a P/S ratio of 2.18. This compares to its industry's average P/S of 3.42.
Finally, investors should note that OXY has a P/CF ratio of 4.59. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 5.50. Within the past 12 months, 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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Occidental Petroleum Corporation (OXY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).