Is Ultra Petroleum 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 Ultra Petroleum Corp.UPLMQ 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, Ultra Petroleum has a trailing twelve months PE ratio of 13.66, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.98. If we focus on the long-term PE trend, Ultra Petroleum's current PE level puts it above its midpoint over the past five years.
Further, the stock's PE also compares favorably with the Zacks classified Oil-Energy sector's trailing twelve months PE ratio, which stands at 73.27. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Ultra Petroleum has a forward PE ratio (price relative to this year's earnings) of just 5.03, so it is fair to say that a more value-oriented path may be ahead for stock in the near term too.
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, Ultra Petroleum has a P/S ratio of about 1.70. This is 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 well below the highs for this stock in particular over the past few years.
If anything, UPLMQ is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading-at least compared to historical norms.
Broad Value Outlook
In aggregate, Ultra Petroleum currently has a Zacks Value Style Score of 'B', putting it into the top 40% of all stocks we cover from this look. This makes Ultra Petroleum a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 3.49, which is better than the industry average of 4.87. Clearly, UPLMQ is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Ultra Petroleum 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 'A' and a Momentum score of 'F'. This gives Ultra Petroleum a Zacks VGM score-or its overarching fundamental grade-of 'B'. (You can read more about the Zacks Style Scores here >> )
Meanwhile, the company's recent earnings estimates have been encouraging. The current quarter and year has seen one upward estimate revision in the past sixty days.
As a result, the current quarter consensus estimate has risen by 2.8% in the past two months, while the full year estimate has inched higher by 1.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Ultra Petroleum Corp. Price and Consensus
This bullish trend is why the stock boasts a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.
Ultra Petroleum 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 (among the Top 10% out of more than 250 industries) and strong Zacks Rank, Ultra Petroleum looks like a strong value contender. In fact, over the past one year, the Zacks categorized Oil & Gas - US Exploration & Production industry has clearly outperformed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company's prospects, as fundamentals indicate that this stock could be a compelling pick.
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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.