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Are Investors Undervaluing Peabody Energy (BTU) Right Now?

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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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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.

One stock to keep an eye on is Peabody Energy (BTU - Free Report) . BTU is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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 0.14. This compares to its industry's average P/S of 0.22.

Finally, we should also recognize that BTU has a P/CF ratio of 1.52. 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 1.91. Over the past 52 weeks, BTU's P/CF has been as high as 2.79 and as low as 0.93, with a median of 1.88.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Peabody Energy is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, BTU feels like a great value stock at the moment.


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