Back to top

Image: Bigstock

Are Investors Undervaluing Peabody Energy (BTU) Right Now?

Read MoreHide Full Article

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore 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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 Peabody Energy (BTU - Free Report) . BTU is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value.

We should also highlight that BTU has a P/B ratio of 0.87. The P/B is a method of comparing a stock's market value to 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 1.51. Within the past 52 weeks, BTU's P/B has been as high as 1.73 and as low as 0.74, with a median of 0.95.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. BTU has a P/S ratio of 0.56. This compares to its industry's average P/S of 0.95.

Finally, we should also recognize that BTU has a P/CF ratio of 2.22. 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. BTU's P/CF compares to its industry's average P/CF of 3.63. Within the past 12 months, BTU's P/CF has been as high as 3.45 and as low as 1.45, with a median of 2.16.

These are just a handful of the figures considered in Peabody Energy's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that BTU is an impressive value stock right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Peabody Energy Corporation (BTU) - free report >>

Published in