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Is Peabody Energy (BTU) Stock Undervalued Right Now?

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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.

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.

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 stock to keep an eye on is Peabody Energy (BTU - Free Report) . BTU is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock holds a P/E ratio of 3.55, while its industry has an average P/E of 3.84. BTU's Forward P/E has been as high as 25.85 and as low as -60.06, with a median of -1.63, all within the past year.

Another valuation metric that we should highlight is BTU's P/B ratio of 1.21. 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 attractive against its industry's average P/B of 2.25. Over the past 12 months, BTU's P/B has been as high as 2.16 and as low as 0.27, with a median of 1.04.

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. BTU has a P/S ratio of 0.76. This compares to its industry's average P/S of 0.86.

Finally, our model also underscores that BTU has a P/CF ratio of 3.38. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 4.31. Over the past year, BTU's P/CF has been as high as 110.47 and as low as -242.21, with a median of -0.24.

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


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