Are Investors Undervaluing Peabody Energy (BTU) Right Now?
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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company value investors might notice is Peabody Energy (BTU). BTU is currently sporting a Zacks Rank of #2 (Buy) and an A for Value.
Investors should also recognize that BTU has a P/B ratio of 1.12. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. BTU's current P/B looks attractive when compared to its industry's average P/B of 1.65. Within the past 52 weeks, BTU's P/B has been as high as 2.47 and as low as 1.10, with a median of 1.47.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. BTU has a P/S ratio of 0.72. This compares to its industry's average P/S of 0.92.
Finally, investors should note that BTU has a P/CF ratio of 2.57. 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. This stock's P/CF looks attractive against its industry's average P/CF of 3.27. Over the past year, BTU's P/CF has been as high as 6.99 and as low as 2.49, with a median of 3.22.
These are only a few of the key metrics included in Peabody Energy's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, BTU looks like an impressive value stock at the moment.
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