- Oops!Something went wrong.Please try again later.
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, WPX Energy , Inc. WPX 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, WPX Energy has a trailing twelve months PE ratio of 12.91, 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 17.90. If we focus on the stock’s long-term PE trend, the current level WPX Energy puts current PE ratio above its midpoint over the past five years.
However, the stock’s PE compares unfavorably with the Zacks Oils-Energy sector’s trailing twelve months PE ratio, which stands at 9.93. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that WPX Energy has a forward PE ratio (price relative to this year’s earnings) of 30.43, so it is fair to expect an increase in the company’s share price in the near future.
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, the stock has a P/S ratio of about 0.78. This is substantially lower than the S&P 500 average, which comes in at 3.10 right now. Also, as we can see in the chart below, this is slightly 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, WPX Energy currently has a Value Style Score of A, putting it into the top 20% of all stocks we cover from this look. This makes WPX a solid choice for value investors and some of its other metrics make it clear too.
For example, the PEG ratio for WPX Energy is just 1.09, a level that is slightly lower than the industry average of 1.34. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, WPX is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though WPX Energy 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 A and a Momentum score of F. This gives WPX a VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>).
Meanwhile, the company’s recent earnings estimates have been disappointing. The current quarter has seen eight estimates go lower in the past sixty days and none higher, while current year estimate has seen 11 downward and no upward revision in the same time period.
This has had a noticeable impact on the consensus estimate. The current quarter consensus estimate has declined 38.5% in the past two months, while the current year estimate has fallen 82.5% in the same time period. You can see the consensus estimate trend and recent price action for the stock in the chart below:
WPX Energy, Inc. Price and Consensus
WPX Energy, Inc. price-consensus-chart | WPX Energy, Inc. Quote
This negative trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
WPX Energy is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However with a sluggish industry rank (bottom 45% out of more than 250 industries) and a Zacks Rank#3 , it is hard to get excited about the stock 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 estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>
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
WPX Energy, Inc. (WPX) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research