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Are Investors Undervaluing Southwestern Energy (SWN) Right Now?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

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.

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.

One company to watch right now is Southwestern Energy (SWN). SWN is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 9.47. This compares to its industry's average Forward P/E of 19.17. Over the past 52 weeks, SWN's Forward P/E has been as high as 9.95 and as low as 2.80, with a median of 5.04.

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Investors should also note that SWN holds a PEG ratio of 0.66. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SWN's PEG compares to its industry's average PEG of 1.63. Over the last 12 months, SWN's PEG has been as high as 0.76 and as low as 0.31, with a median of 0.48.

Value investors will likely look at more than just these metrics, but the above data helps show that Southwestern Energy is likely undervalued currently. And when considering the strength of its earnings outlook, SWN sticks out at as one of the market's strongest value stocks.


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Zacks Investment Research