Is SM Energy (SM) Stock Undervalued Right Now?

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, 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.

SM Energy (SM) is a stock many investors are watching right now. SM is currently sporting a Zacks Rank #1 (Strong Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 4.93, which compares to its industry's average of 12.92. Over the past 52 weeks, SM's Forward P/E has been as high as 6.51 and as low as 2.85, with a median of 4.90.

Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by 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. SM has a P/S ratio of 2.37. This compares to its industry's average P/S of 2.46.

These are only a few of the key metrics included in SM Energy's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, SM looks like an impressive value stock at the moment.

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

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