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 Northern Oil and Gas, Inc. (NYSE:NOG) 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, Northern Oil and Gas has a trailing twelve months PE ratio of 4.19, as you can see in the chart below:
This level actually compares quite favorably with the market at large, as the PE for the S&P 500 stands at about 17.5. Also, if we focus on the long-term PE trend, Northern Oil and Gas’ current PE level puts it below its midpoint of 7.98 over the past five years.
Further, the stock’s PE compares quite favorably with the Oils-Energy Market’s trailing twelve months PE ratio, which stands at 14.1. This indicates that the stock is quite undervalued right now, compared to its peers.
earnings) of 3.47, which is lower than the current level. So, it is fair to say that a slightly more value-oriented path may be ahead for Apple (NASDAQ:AAPL) 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, Northern Oil and Gas has a P/S ratio of 1.34. This is 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 stands below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Northern Oil and Gas currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Northern Oil and Gas a solid choice for value investors.
What About the Stock Overall?
Though Northern Oil and Gas 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 Score of B and a Momentum Score of A. This gives NOG a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen four upward and two downward revisions in the past sixty days, while the full year estimate has seen five upward revisions versus no downward revision in the same time period.
This has had a positive impact on the consensus estimate as the current quarter consensus estimate has shot up 7.7% in the past two months, while the full year estimate has increased 10.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Northern Oil and Gas, Inc. Price and Consensus
Northern Oil and Gas, Inc. price-consensus-chart | Northern Oil and Gas, Inc. Quote
This bullish analyst sentiment is the reason why the stock has a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Bottom Line
Northern Oil and Gas is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Also a strong industry rank (among Top 12% of more than 250 industries) and a Zacks Rank #2 instill investors’ optimism in the stock.
However, over the past two years, the broader industry has clearly outperformed the market at large, as you can see below:
We believe, despite an unsatisfactory past industry performance, a good industry and Zacks rank signal that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this robust value metrics, and we believe that we have a strong value contender in NOG.
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Northern Oil and Gas, Inc. (NOG): Free Stock Analysis Report
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