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Should Value Investors Buy Shell Oil (RDS.A) Stock?

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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 Oil (RDS.A - Free Report) . RDS.A is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.

We should also highlight that RDS.A has a P/B ratio of 0.68. 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 0.74. Within the past 52 weeks, RDS.A's P/B has been as high as 1.29 and as low as 0.46, with a median of 0.84.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. RDS.A has a P/S ratio of 0.41. This compares to its industry's average P/S of 0.49.

Finally, investors will want to recognize that RDS.A has a P/CF ratio of 2.72. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 4.55. RDS.A's P/CF has been as high as 5.45 and as low as 1.93, with a median of 3.75, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Shell Oil is likely undervalued currently. And when considering the strength of its earnings outlook, RDS.A sticks out at as one of the market's strongest value stocks.


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