Is Diamondback Energy (FANG) a Great Value Stock 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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of 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.
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.
Diamondback Energy (FANG) is a stock many investors are watching right now. FANG is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 18.31. This compares to its industry's average Forward P/E of 18.55. FANG's Forward P/E has been as high as 28.48 and as low as 2.04, with a median of 9.94, all within the past year.
We also note that FANG holds a PEG ratio of 0.83. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. FANG's PEG compares to its industry's average PEG of 1.58. Over the last 12 months, FANG's PEG has been as high as 1.30 and as low as 0.09, with a median of 0.60.
Finally, we should also recognize that FANG has a P/CF ratio of 4.35. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. FANG's current P/CF looks attractive when compared to its industry's average P/CF of 5.44. Within the past 12 months, FANG's P/CF has been as high as 11.72 and as low as 1.47, with a median of 6.01.
Value investors will likely look at more than just these metrics, but the above data helps show that Diamondback Energy is likely undervalued currently. And when considering the strength of its earnings outlook, FANG sticks out at as one of the market's strongest value stocks.
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