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Should Value Investors Buy Callon Petroleum (CPE) Stock?

·3 min read

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.

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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Callon Petroleum (CPE) is a stock many investors are watching right now. CPE is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 2.17. This compares to its industry's average Forward P/E of 4.99. CPE's Forward P/E has been as high as 6.35 and as low as 2.02, with a median of 3.77, all within the past year.

Another notable valuation metric for CPE is its P/B ratio of 1.24. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 3.13. CPE's P/B has been as high as 3.88 and as low as 1.16, with a median of 1.95, over the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. CPE has a P/S ratio of 0.96. This compares to its industry's average P/S of 2.15.

Finally, our model also underscores that CPE has a P/CF ratio of 2.70. 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. CPE's current P/CF looks attractive when compared to its industry's average P/CF of 10.34. Over the past year, CPE's P/CF has been as high as 5.08 and as low as -40.27, with a median of 2.75.

If you're looking for another solid Oil and Gas - Exploration and Production - United States value stock, take a look at Comstock Resources (CRK). CRK is a # 2 (Buy) stock with a Value score of A.

Furthermore, Comstock Resources holds a P/B ratio of 3.16 and its industry's price-to-book ratio is 3.13. CRK's P/B has been as high as 5.57, as low as 1.26, with a median of 2.94 over the past 12 months.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Callon Petroleum and Comstock Resources are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CPE and CRK feels like a great value stock at the moment.


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