Is Shell Oil (RDS.A) a Value Stock Right Now? – June 15, 2021


Here at Zacks, we focus on our proven ranking system, which emphasizes earnings estimates and estimate revisions to find winning stocks. But we also understand that investors create their own strategies, so we constantly look at the latest trends in value, growth and momentum to find strong companies for our readers.

Looking at the history of these trends, perhaps none is more popular than value investing. This strategy simply attempts to identify companies that are undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are undervalued by the market as a whole.

In addition to the Zacks Rank, investors looking for stocks with specific characteristics can use our Style Scores system. Of course, value investors will be most interested in the “value” category of the system. Stocks with “A” Value ratings and high Zacks ranks are among the best value stocks available at any given time.

One company to watch right now is Shell Oil. RDS.A currently has a Zacks Rank of #2 (Buy) and an A for Value. The stock has a P/E of 8.83, while the industry average P/E is 11.72. Over the past 12 months, RDS.A forward P/E has been as high as 47.92 and as low as 8.44, with a median of 13.63.

We should also highlight that RDS.A has a P/B ratio of 0.95. The P/B ratio compares a stock’s market value to its book value, which is defined as total assets minus total liabilities. This stock’s P/B looks solid compared to the industry average P/B of 1.09. Over the past 12 months, the P/B of RDS.A has been as high as 1.09 and as low as 0.56, with a median of 0.88.

Value investors also love the K/S ratio, which is calculated by simply dividing a stock’s price by the company’s sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. RDS.A has a P/S ratio of 0.89. This compares to the industry average P/S of 0.93.

Finally, our model also highlights that RDS.A has a P/CF ratio of 4.49. This metric takes into account a company’s operating cash flow and can be used to find stocks that are undervalued given their solid cash outlook. The P/CF of this stock looks attractive compared to the industry average P/CF of 6.40. Over the past 52 weeks, the P/CF of RDS.A has been as high as 5.61 and as low as 2.50, with a median of 4.02.

Value investors will likely be looking at more than just these metrics, but the data above shows that Shell Oil is likely undervalued right now. And when considering the strength of its earnings outlook, RDS.A stands out as one of the strongest value stocks on the market.


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