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Should Value Investors Buy BP (BP) Stock?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore 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 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.

BP (BP) is a stock many investors are watching right now. BP is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A.

We also note that BP holds a PEG ratio of 0.61. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. BP's PEG compares to its industry's average PEG of 0.81. Over the last 12 months, BP's PEG has been as high as 3.24 and as low as 0.43, with a median of 0.91.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. BP has a P/S ratio of 0.49. This compares to its industry's average P/S of 0.71.

Finally, our model also underscores that BP has a P/CF ratio of 6.16. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 6.22. Over the past year, BP's P/CF has been as high as 7.88 and as low as 6.14, with a median of 6.94.

These are only a few of the key metrics included in BP's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, BP looks like an impressive value stock at the moment.

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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