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 Western Midstream Partners, LP ( WES Quick Quote WES - 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, Western Midstream Partners has a trailing twelve months PE ratio of 7.74, 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 28.72. If we focus on the long-term PE trend, Western Midstream Partners’ current PE level puts it below its midpoint (which is 18.81) over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point. Further, the stock’s PE also compares favorably with the Zacks Oils-Energy Market sector’s trailing twelve months PE ratio, which stands at 85.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. We should also point out that Western Midstream Partners has a forward PE ratio (price relative to this year’s earnings) of just 8.4, which is higher than the current level. So, it is fair to expect an increase in the company’s share price in the near term. 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, Western Midstream Partners has a P/S ratio of about 2.95. This is a bit lower than the S&P 500 average, which comes in at 5.05x 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. If anything, this suggests some level of undervalued trading—at least compared to historical norms. Broad Value Outlook
In aggregate, Western Midstream Partners currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Western Midstream Partners a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 4.05, which is far better than the industry average of 5.64. Clearly, WES is a solid choice on the value front from multiple angles. What About the Stock Overall?
Though Western Midstream Partners 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 C and a Momentum Score of C. This gives WES 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 robust at best. The current year has seen three estimates go higher in the past sixty days compared to none lower, while the next year estimate has seen one up and none down in the same time period. This has had a noticeable impact on the consensus estimate though as the current year consensus estimate has risen by 3.5% in the past two months, while the next year estimate has increased by 5.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below: Western Midstream Partners, LP Price and Consensus
Despite this positive trend, the stock has a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term.
Western Midstream Partners is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among Bottom 12% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Oil and Gas - Refining and Marketing - Master Limited Partnerships industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick. 5G Revolution: 3 Stocks to Make Your Move
With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.
Today you have an historic chance to pursue almost unimaginable gains like Microsoft, Netflix, and Apple in their early phases. Zacks has released a Special Report that reveals our . . . Smartest stock for 5G telecom Safest investment in 5G hardware Single best 5G buy of all! Download now. Today the report is FREE >>