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Is Southwestern Energy (SWN) a Good Pick for Value Investors?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Southwestern Energy Company (SWN - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Southwestern Energy has a trailing twelve months PE ratio of 16.13, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 21.03 If we focus on the long-term PE trend, Southwestern Energy’s current PE level puts it almost in line with its midpoint over the past five years. Notably, the current level stands well below the highs for the stock, suggesting that it could be a solid entry point.
Further, the stock’s PE compares favorably with the Zacks Oils - Energy sector’s trailing twelve months PE ratio, which stands at 27.96. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Southwestern Energy has a forward PE ratio (price relative to this year’s earnings) of just 14.24, so it is fair to say that a slightly more value-oriented path may be ahead for Southwestern Energy stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Southwestern Energy has a P/S ratio of about 1.05. This is much lower than the S&P 500 average, which comes in at 3.33 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Southwestern Energy currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Southwestern Energy a solid choice for value investors.
What About the Stock Overall?
Though Southwestern Energy might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of B and a Momentum Score of F. This gives SWN a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been somewhat discouraging. The current quarter has seen two estimates go higher in the past thirty days compared to three lower, while the full year estimate has seen one upward and six downward revisions in the same time period.
This has had a dismal impact on the consensus estimate, as the current quarter consensus estimate has dropped by 6.3% in the past month, while the full year estimate has tumbled 8.2%.
In light of these bearish trends, the stock has just a Zacks Rank #3 (Hold), which indicates why we are looking for in-line performance from the company in the near term.
Bottom Line
Southwestern Energy is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Is Southwestern Energy (SWN) a Good Pick for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
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One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Southwestern Energy Company (SWN - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Southwestern Energy has a trailing twelve months PE ratio of 16.13, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 21.03 If we focus on the long-term PE trend, Southwestern Energy’s current PE level puts it almost in line with its midpoint over the past five years. Notably, the current level stands well below the highs for the stock, suggesting that it could be a solid entry point.
Further, the stock’s PE compares favorably with the Zacks Oils - Energy sector’s trailing twelve months PE ratio, which stands at 27.96. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Southwestern Energy has a forward PE ratio (price relative to this year’s earnings) of just 14.24, so it is fair to say that a slightly more value-oriented path may be ahead for Southwestern Energy stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Southwestern Energy has a P/S ratio of about 1.05. This is much lower than the S&P 500 average, which comes in at 3.33 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Southwestern Energy currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Southwestern Energy a solid choice for value investors.
What About the Stock Overall?
Though Southwestern Energy might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of B and a Momentum Score of F. This gives SWN a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been somewhat discouraging. The current quarter has seen two estimates go higher in the past thirty days compared to three lower, while the full year estimate has seen one upward and six downward revisions in the same time period.
This has had a dismal impact on the consensus estimate, as the current quarter consensus estimate has dropped by 6.3% in the past month, while the full year estimate has tumbled 8.2%.
In light of these bearish trends, the stock has just a Zacks Rank #3 (Hold), which indicates why we are looking for in-line performance from the company in the near term.
Bottom Line
Southwestern Energy is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>