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Should Value Investors Buy Devon Energy (DVN) Stock?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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.

One stock to keep an eye on is Devon Energy (DVN). DVN is currently sporting a Zacks Rank of #2 (Buy) and an A for Value.

Investors should also recognize that DVN has a P/B ratio of 1.18. 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 company's current P/B looks solid when compared to its industry's average P/B of 1.89. DVN's P/B has been as high as 1.72 and as low as 0.35, with a median of 1.35, 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. DVN has a P/S ratio of 0.6. This compares to its industry's average P/S of 0.61.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Devon Energy is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, DVN feels like a great value stock at the moment.


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