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Are Investors Undervaluing Shell Oil (RDS.A) Right Now?

Zacks Equity Research
·3 mins read

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.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 to watch right now is Shell Oil (RDS.A). RDS.A is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.

We should also highlight that RDS.A has a P/B ratio of 0.73. 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 0.74. Within the past 52 weeks, RDS.A's P/B has been as high as 1.29 and as low as 0.46, with a median of 0.97.

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. RDS.A has a P/S ratio of 0.43. This compares to its industry's average P/S of 0.49.

Finally, our model also underscores that RDS.A has a P/CF ratio of 2.93. 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. RDS.A's P/CF compares to its industry's average P/CF of 4.55. Within the past 12 months, RDS.A's P/CF has been as high as 5.45 and as low as 1.93, with a median of 4.10.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Shell Oil is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, RDS.A feels like a great value stock at the moment.


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