Should Value Investors Buy PG&E (PCG) Stock?

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.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 PG&E (PCG). PCG is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 9.36, while its industry has an average P/E of 15.48. Over the past 52 weeks, PCG's Forward P/E has been as high as 14.79 and as low as 8.28, with a median of 10.97.

We also note that PCG holds a PEG ratio of 1.05. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. PCG's PEG compares to its industry's average PEG of 1.52. Over the past 52 weeks, PCG's PEG has been as high as 1.54 and as low as 0.88, with a median of 1.13.

Another notable valuation metric for PCG is its P/B ratio of 1.34. The P/B ratio pits a stock's market value against 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 2.66. Within the past 52 weeks, PCG's P/B has been as high as 2.09 and as low as 1.16, with a median of 1.54.

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. PCG has a P/S ratio of 1.72. This compares to its industry's average P/S of 2.58.

Finally, we should also recognize that PCG has a P/CF ratio of 4.89. 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 12.51. PCG's P/CF has been as high as 6.87 and as low as 4.26, with a median of 5.49, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that PG&E is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, PCG feels like a great value stock at the moment.

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

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