Is Shell Oil (RDS.A) Stock Undervalued Right Now?

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.

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.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Shell Oil (RDS.A). RDS.A is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 41.27, while its industry has an average P/E of 79.88. Over the past year, RDS.A's Forward P/E has been as high as 416.88 and as low as 5.81, with a median of 11.55.

Investors will also notice that RDS.A has a PEG ratio of 8.25. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. RDS.A's PEG compares to its industry's average PEG of 19.29. Over the past 52 weeks, RDS.A's PEG has been as high as 83.38 and as low as 1.16, with a median of 2.23.

We should also highlight that RDS.A has a P/B ratio of 0.69. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 0.74. Over the past year, RDS.A's P/B has been as high as 1.35 and as low as 0.46, with a median of 1.16.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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. RDS.A has a P/S ratio of 0.39. This compares to its industry's average P/S of 0.44.

Finally, our model also underscores that RDS.A has a P/CF ratio of 3.48. 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 4.55. Within the past 12 months, RDS.A's P/CF has been as high as 6.30 and as low as 2.23, with a median of 5.27.

These are only a few of the key metrics included in Shell Oil'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, RDS.A looks like an impressive value stock at the moment.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.