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Is Earthstone Energy (ESTE) Stock Undervalued Right Now?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 Earthstone Energy (ESTE). ESTE is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 6.61 right now. For comparison, its industry sports an average P/E of 13. ESTE's Forward P/E has been as high as 10.91 and as low as 3.75, with a median of 8.47, all within the past year.

Finally, investors will want to recognize that ESTE has a P/CF ratio of 2.58. 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. This stock's P/CF looks attractive against its industry's average P/CF of 5.17. Over the past 52 weeks, ESTE's P/CF has been as high as 7.95 and as low as 1.43, with a median of 2.96.

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


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