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Should Value Investors Buy Earthstone Energy (ESTE) Stock?

Zacks Equity Research

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.

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 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.

One company value investors might notice is Earthstone Energy (ESTE). ESTE is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 5.68. This compares to its industry's average Forward P/E of 12.29. Over the past year, ESTE's Forward P/E has been as high as 10.91 and as low as 3.75, with a median of 8.47.

Finally, investors will want to recognize that ESTE has a P/CF ratio of 2.20. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 4.94. ESTE's P/CF has been as high as 7.95 and as low as 1.43, with a median of 3.32, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Earthstone Energy is likely undervalued currently. And when considering the strength of its earnings outlook, ESTE sticks out at as one of the market's strongest value stocks.


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