Is Approach Resources (AREX) a Great Value Stock Right Now?
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
One company to watch right now is Approach Resources (AREX). AREX is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A.
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. AREX has a P/S ratio of 0.79. This compares to its industry's average P/S of 1.3.
Finally, investors should note that AREX has a P/CF ratio of 0.93. 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 3.58. AREX's P/CF has been as high as 3.27 and as low as -8.64, with a median of 2.21, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Approach Resources is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AREX feels like a great value stock at the moment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.