Should Value Investors Buy Phillips 66 (PSX) Stock?
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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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.
Phillips 66 (PSX) is a stock many investors are watching right now. PSX is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.
Investors should also note that PSX holds a PEG ratio of 0.42. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. PSX's PEG compares to its industry's average PEG of 0.86. Within the past year, PSX's PEG has been as high as 0.66 and as low as 0.30, with a median of 0.40.
Another valuation metric that we should highlight is PSX's P/B ratio of 1.59. 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. This stock's P/B looks attractive against its industry's average P/B of 2. PSX's P/B has been as high as 1.78 and as low as 1.19, with a median of 1.43, over the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. PSX has a P/S ratio of 0.31. This compares to its industry's average P/S of 0.35.
Finally, we should also recognize that PSX has a P/CF ratio of 3.94. 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 company's current P/CF looks solid when compared to its industry's average P/CF of 4.87. Over the past 52 weeks, PSX's P/CF has been as high as 4.49 and as low as 2.99, with a median of 3.85.
Investors could also keep in mind Valero Energy (VLO), an Oil and Gas - Refining and Marketing stock with a Zacks Rank of # 2 (Buy) and Value grade of A.
Valero Energy is trading at a forward earnings multiple of 6.94 at the moment, with a PEG ratio of 1.16. This compares to its industry's average P/E of 7.44 and average PEG ratio of 0.86.
Over the last 12 months, VLO's P/E has been as high as 8.76, as low as 4.41, with a median of 6.26, and its PEG ratio has been as high as 1.46, as low as 0.73, with a median of 1.04.
Valero Energy sports a P/B ratio of 1.60 as well; this compares to its industry's price-to-book ratio of 2. In the past 52 weeks, VLO's P/B has been as high as 2.31, as low as 1.39, with a median of 1.83.
These are only a few of the key metrics included in Phillips 66 and Valero Energy strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, PSX and VLO look like an impressive value stock at the moment.
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Phillips 66 (PSX) : Free Stock Analysis Report
Valero Energy Corporation (VLO) : Free Stock Analysis Report
