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Is NRG Energy (NRG) a Great Value Stock Right Now?

Zacks Equity Research

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 use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 NRG Energy (NRG). NRG is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 6.97, which compares to its industry's average of 13.91. NRG's Forward P/E has been as high as 13.18 and as low as 6.97, with a median of 8.11, all within the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. NRG has a P/S ratio of 1.02. This compares to its industry's average P/S of 2.15.

Finally, investors will want to recognize that NRG has a P/CF ratio of 6.59. 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 6.80. NRG's P/CF has been as high as 14.34 and as low as -31.67, with a median of 11.26, all within the past year.

These are only a few of the key metrics included in NRG 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, NRG looks like an impressive value stock at the moment.


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