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Is BP (BP) Stock Undervalued Right Now?

·3-min read

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

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.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company value investors might notice is BP (BP). BP is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 4.73, while its industry has an average P/E of 6.41. BP's Forward P/E has been as high as 10.10 and as low as 4.55, with a median of 6.63, all within the past year.

Investors should also recognize that BP has a P/B ratio of 1.18. Investors use the P/B ratio to look at a stock's market value versus 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 1.30. BP's P/B has been as high as 1.42 and as low as 0.83, with a median of 1.06, over the past year.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. BP has a P/S ratio of 0.52. This compares to its industry's average P/S of 0.6.

Investors could also keep in mind Shell (SHEL), an Oil and Gas - Integrated - International stock with a Zacks Rank of # 2 (Buy) and Value grade of A.

Shares of Shell currently holds a Forward P/E ratio of 5.33, and its PEG ratio is 0.66. In comparison, its industry sports average P/E and PEG ratios of 6.41 and 0.50.

SHEL's price-to-earnings ratio has been as high as 9.46 and as low as 5.18, with a median of 7.15, while its PEG ratio has been as high as 2.37 and as low as 0.64, with a median of 1.79, all within the past year.

Additionally, Shell has a P/B ratio of 1.11 while its industry's price-to-book ratio sits at 1.30. For SHEL, this valuation metric has been as high as 1.31, as low as 0.85, with a median of 1.08 over the past year.

These are just a handful of the figures considered in BP and Shell's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that BP and SHEL is an impressive value stock right now.


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