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Should Value Investors Buy Peabody Energy (BTU) Stock?

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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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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 to watch right now is Peabody Energy (BTU - Free Report) . BTU is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A.

Another valuation metric that we should highlight is BTU's P/B ratio of 1.15. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. BTU's current P/B looks attractive when compared to its industry's average P/B of 1.57. Over the past 12 months, BTU's P/B has been as high as 2.47 and as low as 0.99, with a median of 1.41.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. BTU has a P/S ratio of 0.75. This compares to its industry's average P/S of 0.81.

Finally, investors should note that BTU has a P/CF ratio of 2.61. 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. BTU's current P/CF looks attractive when compared to its industry's average P/CF of 2.89. Over the past 52 weeks, BTU's P/CF has been as high as 6.99 and as low as 2.27, with a median of 3.09.

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


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