Back to top

Image: Bigstock

Should Value Investors Buy Pampa Energia (PAM) Stock?

Read MoreHide Full Article

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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

Pampa Energia (PAM - Free Report) is a stock many investors are watching right now. PAM is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 6.08, which compares to its industry's average of 13.55. PAM's Forward P/E has been as high as 8.23 and as low as 3.88, with a median of 6.07, all within the past year.

Investors should also recognize that PAM has a P/B ratio of 0.84. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. PAM's current P/B looks attractive when compared to its industry's average P/B of 2.22. PAM's P/B has been as high as 1.13 and as low as 0.61, with a median of 0.85, 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. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. PAM has a P/S ratio of 1.47. This compares to its industry's average P/S of 1.95.

Finally, we should also recognize that PAM has a P/CF ratio of 3.50. 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 company's current P/CF looks solid when compared to its industry's average P/CF of 11.27. Over the past year, PAM's P/CF has been as high as 4.69 and as low as 2.29, with a median of 3.35.

TransAlta (TAC - Free Report) may be another strong Utility - Electric Power stock to add to your shortlist. TAC is a # 2 (Buy) stock with a Value grade of A.

Additionally, TransAlta has a P/B ratio of 2.98 while its industry's price-to-book ratio sits at 2.22. For TAC, this valuation metric has been as high as 4.80, as low as 1.77, with a median of 2.72 over the past year.

These are just a handful of the figures considered in Pampa Energia and TransAlta'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 PAM and TAC is an impressive value stock right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Pampa Energia S.A. (PAM) - free report >>

TransAlta Corporation (TAC) - free report >>

Published in