Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Abraxas Petroleum Corporation AXAS stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Abraxas Petroleum has a trailing twelve months PE ratio of 10.82, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 17.95. If we focus on the stock’s long-term PE trend, the current level puts Abraxas Petroleum’s current PE ratio slightly above its midpoint (which is 9.87) over the past five years.
Further, the stock’s PE also compares favorably with the Zacks Oils-Energy sector’s trailing twelve months PE ratio, which stands at 14.34. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Abraxas Petroleum has a forward PE ratio (price relative to this year’s earnings) of just 4.49, so it is fair to say that a slightly more value-oriented path may be ahead for Abraxas Petroleum’s stock in the near term too.
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Abraxas Petroleum has a P/S ratio of about 1.38. This is substantially lower than the S&P 500 average, which comes in at 3.40 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Abraxas Petroleum currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes AXAS a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 2.68, which is slightly better than the industry average of 3.24. Clearly, AXAS is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Abraxas Petroleum might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of A. This gives AXAS a VGM score—or its overarching fundamental grade—of C. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen one estimate go higher in the past sixty days and one lower, while the full year estimate has seen two upward and one downward revisions in the same time period.
This has had a noticeable impact on the consensus estimate, as the current quarter consensus estimate has surged 40% in the past two months, while the full year estimate has climbed 12.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Abraxas Petroleum Corporation Price and Consensus
Abraxas Petroleum Corporation price-consensus-chart | Abraxas Petroleum Corporation Quote
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Abraxas Petroleum is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Abraxas Petroleum is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (top 12% out of more than 250 industries) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for industry trend to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
See Latest Stocks Today >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Abraxas Petroleum Corporation (AXAS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research