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Should Value Investors Buy Southwestern Energy (SWN) Stock?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

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

Another notable valuation metric for SWN is its P/B ratio of 1. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.51. Within the past 52 weeks, SWN's P/B has been as high as 1.55 and as low as 0.86, with a median of 1.29.

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. SWN has a P/S ratio of 0.66. This compares to its industry's average P/S of 1.6.

Finally, we should also recognize that SWN has a P/CF ratio of 1.92. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. SWN's current P/CF looks attractive when compared to its industry's average P/CF of 4.10. Over the past year, SWN's P/CF has been as high as 2.98 and as low as 1.14, with a median of 2.18.

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


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