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 Atwood Oceanics, Inc. ATW 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, Atwood Oceanics has a trailing twelve months PE ratio of 3.74, 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 20.26. If we focus on the stock’s long-term PE trend, the current level puts Atwood Oceanics’ current PE ratio below its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Oil and Gas - Drilling sector’s trailing twelve months PE ratio, which stands at 49.48. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers.
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, Atwood Oceanics has a P/S ratio of about 0.84. This is a bit lower than the S&P 500 average, which comes in at 3.14 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, ATW is near 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, Atwood Oceanics currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Atwood Oceanics a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 1.45, which is far lower than the industry average of 1.58. Clearly, ATW is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Atwood Oceanics 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 ‘F’ and a Momentum score of ‘D’. This gives ATW a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been favorable. The current quarter has seen four estimates go higher in the past sixty days, while the full year estimate has seen two up and one down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate loss narrowed down by 10 cents in the past two months, while the full year estimate loss has narrowed down by 7 cents. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Atwood Oceanics, Inc. Price and Consensus
Atwood Oceanics, Inc. Price and Consensus | Atwood Oceanics, Inc. Quote
Despite the bullish analyst sentiments, the stock holds a Zacks Rank #3 (Hold).
Atwood Oceanics is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a strong industry rank (among Top 45% of more than 250 industries) instills our confidence on the stock.
However, with 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 - Drilling industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Atwood Oceanics, Inc. (ATW) : Free Stock Analysis Report
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