Australia Markets open in 9 hrs 7 mins

    -11.00 (-0.15%)

    -0.0044 (-0.6535%)
  • ASX 200

    -13.40 (-0.19%)
  • OIL

    -0.76 (-1.09%)
  • GOLD

    -14.90 (-0.75%)

    +860.69 (+2.08%)
  • CMC Crypto 200

    -21.06 (-3.41%)

Are Investors Undervaluing Peabody Energy (BTU) Right Now?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

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 to watch right now is Peabody Energy (BTU). BTU is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.

Investors should also recognize that BTU has a P/B ratio of 1.50. 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 attractive against its industry's average P/B of 1.73. Over the past 12 months, BTU's P/B has been as high as 2.47 and as low as 0.86, with a median of 1.51.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. BTU has a P/S ratio of 0.87. This compares to its industry's average P/S of 1.05.

Finally, our model also underscores that BTU has a P/CF ratio of 3. 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 3.35. Over the past 52 weeks, BTU's P/CF has been as high as 6.99 and as low as 2.39, with a median of 3.28.

Another great Coal stock you could consider is Ramaco Resources (METC), which is a # 2 (Buy) stock with a Value Score of A.

Ramaco Resources also has a P/B ratio of 1.54 compared to its industry's price-to-book ratio of 1.73. Over the past year, its P/B ratio has been as high as 4.33, as low as 1.25, with a median of 1.80.

Value investors will likely look at more than just these metrics, but the above data helps show that Peabody Energy and Ramaco Resources are likely undervalued currently. And when considering the strength of its earnings outlook, BTU and METC sticks out as one of the market's strongest value stocks.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Peabody Energy Corporation (BTU) : Free Stock Analysis Report

Ramaco Resources, Inc. (METC) : Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research