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Should Value Investors Buy Carrizo Oil (CRZO) Stock?

Zacks Equity Research
Canadian Solar (CSIQ) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

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.

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.

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.

One stock to keep an eye on is Carrizo Oil (CRZO). CRZO is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.

We should also highlight that CRZO has a P/B ratio of 1.29. 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. CRZO's current P/B looks attractive when compared to its industry's average P/B of 2.24. CRZO's P/B has been as high as 6.15 and as low as 0.95, with a median of 2.43, 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. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. CRZO has a P/S ratio of 1.16. This compares to its industry's average P/S of 1.58.

Finally, we should also recognize that CRZO has a P/CF ratio of 1.80. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. CRZO's current P/CF looks attractive when compared to its industry's average P/CF of 5.30. Within the past 12 months, CRZO's P/CF has been as high as 7.40 and as low as 1.34, with a median of 4.46.

These are only a few of the key metrics included in Carrizo Oil'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, CRZO looks like an impressive value stock at the moment.


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