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Is Shell Oil (RDS.A) a Great Value Stock Right Now?

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, 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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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 company value investors might notice is Shell Oil (RDS.A). RDS.A is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.

Another notable valuation metric for RDS.A is its P/B ratio of 0.75. 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. RDS.A's current P/B looks attractive when compared to its industry's average P/B of 1.10. Within the past 52 weeks, RDS.A's P/B has been as high as 1.35 and as low as 0.46, with a median of 1.18.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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. RDS.A has a P/S ratio of 0.42. This compares to its industry's average P/S of 0.47.

Finally, we should also recognize that RDS.A has a P/CF ratio of 3.35. 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. RDS.A's current P/CF looks attractive when compared to its industry's average P/CF of 5.51. Over the past year, RDS.A's P/CF has been as high as 5.99 and as low as 1.93, with a median of 5.05.

Value investors will likely look at more than just these metrics, but the above data helps show that Shell Oil is likely undervalued currently. And when considering the strength of its earnings outlook, RDS.A sticks out at as one of the market's strongest value stocks.


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