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Are Investors Undervaluing Southwestern Energy (SWN) Right Now?

Zacks Equity Research
PEBO vs. FIBK: Which Stock Is the Better Value Option?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

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 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.

Southwestern Energy (SWN) is a stock many investors are watching right now. SWN is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 6.10, while its industry has an average P/E of 11.24. Over the last 12 months, SWN's Forward P/E has been as high as 13.36 and as low as 4.19, with a median of 6.20.

Another valuation metric that we should highlight is SWN's P/B ratio of 1.55. Investors use the P/B ratio to look at a stock's market value versus 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 2. Over the past year, SWN's P/B has been as high as 2.06 and as low as 1.04, with a median of 1.38.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. SWN has a P/S ratio of 0.97. This compares to its industry's average P/S of 2.14.

Finally, investors should note that SWN has a P/CF ratio of 3.17. 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 6.40. Over the past 52 weeks, SWN's P/CF has been as high as 3.48 and as low as 1.19, with a median of 2.43.

Value investors will likely look at more than just these metrics, but the above data helps show that Southwestern Energy is likely undervalued currently. And when considering the strength of its earnings outlook, SWN sticks out at as one of the market's strongest value stocks.


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