This method discovered several great candidates for value-oriented investors, but today let’s focus on Transocean LTD (NYSE:RIG) as this stock is looking especially impressive right now. And while there are numerous reasons why this is the case, we have highlighted three of the most vital reasons for RIG’s status as a solid value stock below:
Price to Forward Sales for Transocean
One of the most underrated ratios for value investors is the price/forward sales metric. This ratio shows investors how much they are paying for each dollar of revenues generated. In other words, a lower number is better here while a price to sales ratio of 1 means that you are paying one dollar for each dollar in sales.
With a P/S ratio of 0.65, RIG investors are paying 65 cents in stock price for each dollar of revenue generated by the company. Compare this to the industry average of 0.87, and it is safe to say that RIG is undervalued compared to many of its peers on this important metric.
Price/Cash Flow for Transocean Stock
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This reading is preferred by some since it avoids amortization and depreciation concerns and can give a more accurate picture of the financial health in a business.
The P/CF ratio for RIG comes in at 1.98, and since investors are generally looking for a reading under 20 here, this is pretty good news. Meanwhile, we should also point out that the industry average for this metric is 2.26, so Transocean has its peers beat in this regard too.
RIG Earnings Estimate Revisions Moving in the Right Direction
The solid value ratios outlined in the preceding paragraphs might be enough for some investors, but we should also note that the earnings estimate revisions have been trending in a positive direction as well. Analysts who follow RIG stock have been raising their estimates for the company lately, meaning that the EPS picture is looking a bit more favorably for Transocean now.
Over the past 60 days, 11 earnings estimate has gone higher compared to no lower for the full year, while we are also seeing that 7 estimates have move upwards with 4 downward revisions for the next year time frame too. These revisions have helped to boost the consensus estimate as 60 days ago RIG was expected to post earnings of $1.35 per share for the full year though today it looks to have EPS of $2.27 for the full year.
For the reasons detailed above, investors shouldn’t be surprised to read that we have RIG as a stock with a Value Score of ‘B’ and a Zacks Rank #2 (Buy). So if you are a value investor, definitely keep RIG on your short list as this looks be a stock that is very well-positioned for gains in the near term.
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