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Are Investors Undervaluing Marathon Oil (MRO) 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.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company value investors might notice is Marathon Oil (MRO). MRO is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 20.90, while its industry has an average P/E of 21.32. Over the past year, MRO's Forward P/E has been as high as 70.65 and as low as 14.73, with a median of 22.67.

MRO is also sporting a PEG ratio of 2.69. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. MRO's PEG compares to its industry's average PEG of 2.85. MRO's PEG has been as high as 7.17 and as low as 1.89, with a median of 2.91, all within the past year.

Another notable valuation metric for MRO is its P/B ratio of 0.69. The P/B ratio pits a stock's market value against 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 1.31. MRO's P/B has been as high as 1.26 and as low as 0.69, with a median of 0.88, over the past year.

Finally, investors should note that MRO has a P/CF ratio of 2.96. 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. MRO's P/CF compares to its industry's average P/CF of 4.05. Within the past 12 months, MRO's P/CF has been as high as 4.64 and as low as 2.71, with a median of 3.29.

These are just a handful of the figures considered in Marathon Oil's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that MRO is an impressive value stock right now.


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