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Should Value Investors Consider Repsol S.A. (REPYY) Stock?

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 Repsol S.A.REPYY 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:

PE Ratio

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, Repsol has a trailing twelve months PE ratio of 11.26, 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 compares in at about 19.96. If we focus on the stock's long-term PE trend, the current level puts Repsol's current PE ratio tad above its midpoint over the past five years, with the number having trended upwards over the past few months.

Further, the stock's PE also compares favorably with the Zacks classified Oil and Gas - Integrated - International industry's trailing twelve months PE ratio, which stands at 49.26. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Repsol has a forward PE ratio (price relative to this year's earnings) of just 13.82, so it is fair to say that a slightly more value-oriented path may be ahead for Repsol stock in the near term too.

P/S Ratio

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, Repsol has a P/S ratio of about 0.78. This is lower than the S&P 500 average, which comes in at 2.98 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, REPYY is trading somewhat near the median value 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-at least compared to historical norms.

Broad Value Outlook

In aggregate, Repsol 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 Repsol a solid choice for value investors.

What About the Stock Overall?

Though Repsol 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 'B' and a Momentum score of 'F'. This gives REPYY 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 mixed at best. The current year has seen one estimate go higher in the past sixty days compared to no movement in the opposite direction, while the next year estimate has seen one up and one down over the same time period.

This has had a substantial impact on the consensus estimate as the current year consensus estimate has risen by 13.9% in the past two months, while the next year estimate has jumped 9.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Repsol SA Price and Consensus

Repsol SA Price and Consensus | Repsol SA Quote

However, despite a bullish estimate revision trend, the stock holds a negative long-term earnings growth rate of -15%.

This somewhat mixed sentiment is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

Repsol is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 26%) and a Zacks Rank #3, it is hard to get too excited about this company overall.

In fact, over the past two years, the Zacks Oil and Gas - Integrated - International industry has clearly underperformed the broader market, as you can see below:

So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, 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.


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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