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Should Value Investors Buy Denbury Resources (DNR) Stock?

Zacks Equity Research
BCB Bancorp (BCBP) delivered earnings and revenue surprises of 7.14% and -2.34%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the 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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

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

Another notable valuation metric for DNR is its P/B ratio of 1.05. 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 1.59. Within the past 52 weeks, DNR's P/B has been as high as 3.16 and as low as 0.68, with a median of 1.89.

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. DNR has a P/S ratio of 0.7. This compares to its industry's average P/S of 1.66.

Finally, our model also underscores that DNR has a P/CF ratio of 2.07. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 4.33. Over the past 52 weeks, DNR's P/CF has been as high as 6.96 and as low as 1.35, with a median of 3.75.

These are only a few of the key metrics included in Denbury Resources'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, DNR looks like an impressive value stock at the moment.


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