Is Halcon Resources Corp. (HK) a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn't want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let's put Halcon Resources CorporationHK stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock's current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Halcon Resources has a trailing twelve months PE ratio of 0.28, as you can see in the chart below:
Since a stock's PE is based on only two inputs, such a fall could have been driven by either consistently bad price performance or a highly favorable earnings trend. If we delve deeper, we find that the company's price has fallen considerably while earnings have remained more or less stable. However, earnings are expected to witness a sharp downward trend in 2017, as shown in the graph below.
We should also point out that Halcon Resources has a forward PE ratio (price relative to this year's earnings) of 12.45, so it is fair to expect an increase in the company's share price in the near future.
Another key metric to note is the Price/Sales ratio. This approach compares a given stock's price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Halcon Resources has a P/S ratio of about 1.89. This is somewhat lower than the S&P 500 average, which comes in at 2.99 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
If anything, Halcon Resources is towards the higher end of its range in the time period from a P/S metric, which suggests that the company's stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Halcon Resources currently has a Zacks Value Style Score of 'A', putting it into the top 20% of all stocks we cover from this look. This makes Halcon Resources a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 2.58, which is better than the industry average of 4.87. Clearly, Halcon Resources is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Halcon Resources might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of 'F' and a Momentum score of 'A'. This gives Halcon Resources a Zacks VGM score-or its overarching fundamental grade-of 'C'. (You can read more about the Zacks Style Scores here >> )
Meanwhile, the company's recent earnings estimates have been somewhat disappointing. The current quarter has seen two estimates go lower in the past sixty days, compared to none higher, while the full year estimate has seen one downward and no upward revisions in the same time period.
This has had a small impact on the consensus estimate, as the current quarter consensus estimate remained constant in the past two months, while the full year estimate has dipped 0.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Halcon Resources Corporation Price and Consensus
In spite of the slightly bearish analyst opinion, the stock's Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Halcon Resources is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (Top 10% out of more than 250 industries) and strong Zacks Rank, Halcon Resources looks like a strong value contender. In fact, over the past one year, the Zacks categorized Oil & Gas-US Exploration and Production industry has clearly outperformed the broader market, as you can see below:
Zacks' Top 10 Stocks for 2017
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.