Should Value Investors Buy DCP Midstream Partners (DCP) Stock?
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.
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 use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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 DCP Midstream Partners (DCP). DCP is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 8.46. This compares to its industry's average Forward P/E of 13.56. Over the last 12 months, DCP's Forward P/E has been as high as 30.57 and as low as 6.94, with a median of 8.68.
Another notable valuation metric for DCP is its P/B ratio of 1.45. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. DCP's current P/B looks attractive when compared to its industry's average P/B of 1.63. DCP's P/B has been as high as 1.61 and as low as 1.02, with a median of 1.32, over the past year.
Finally, investors will want to recognize that DCP has a P/CF ratio of 6.57. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. DCP's P/CF compares to its industry's average P/CF of 8.87. Within the past 12 months, DCP's P/CF has been as high as 13.31 and as low as 4.93, with a median of 8.63.
Investors could also keep in mind Transportadora De Gas Ord B (TGS), an Oil and Gas - Production and Pipelines stock with a Zacks Rank of # 2 (Buy) and Value grade of A.
Additionally, Transportadora De Gas Ord B has a P/B ratio of 0.74 while its industry's price-to-book ratio sits at 1.63. For TGS, this valuation metric has been as high as 0.85, as low as 0.46, with a median of 0.67 over the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that DCP Midstream Partners and Transportadora De Gas Ord B are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, DCP and TGS feels like a great value stock at the moment.
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DCP Midstream Partners, LP (DCP) : Free Stock Analysis Report
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