For investors looking for chances where the market price may not completely show a company's true worth, a disciplined value investing method can be a useful guide. This method, made famous by Benjamin Graham and Warren Buffett, focuses on finding stocks trading for less than their calculated value, usually decided by examining financial condition, earnings, and future possibilities. A useful method to use this is by searching for companies that perform well on key financial measures while also seeming inexpensive. One stock that recently appeared from a "Decent Value" search, which looks for good valuation scores together with acceptable scores in earnings, financial condition, and growth, is RANGE RESOURCES CORP (NYSE:RRC).
Valuation: The Heart of the Chance
The main attraction for a value investor is a stock's price compared to its financial situation. RANGE RESOURCES CORP (RRC) makes a strong case here, receiving a good Valuation Score of 7 out of 10 from ChartMill's fundamental review. The numbers imply the market might be pricing the company's earnings ability too low.
- Good Earnings Multiples: RRC's Price-to-Earnings (P/E) ratio of 12.34 is lower than the S&P 500 average of 26.22, showing a lower price compared to the wider market. It also trades for less than 65% of similar companies in the Oil, Gas & Consumable Fuels industry.
- Positive Forward View: The price looks better when thinking about future earnings. With a Forward P/E ratio of 9.17, RRC is priced lower than 78% of its industry rivals and sits below the S&P 500's forward average.
- Growth Adjustment: A low PEG ratio, which changes the P/E for estimated growth, further hints that the stock's current price may not include its future earnings possibility. This match of fair price with growth estimates is a central idea of value investing, as it tries to pay a suitable price for a company's future earnings.
You can see the full details of these numbers in the full fundamental review report for RRC.
Financial Condition and Earnings: Reviewing the Base
An inexpensive stock is only a worthwhile investment if the company is financially stable. Value investing needs a safety buffer, which is supported by sound financial condition and steady earnings. RRC's profile displays a varied but mainly acceptable view in these parts.
The company's Earnings Score is a good 8/10. Important positives contain a high Return on Invested Capital (ROIC) of 9.41%, doing better than 80% of its industry, and high gross and operating margins. This shows RRC is effective at turning its resources into profit, a necessary trait for a value choice, as it implies the business has a lasting advantage and can maintain itself.
Financial Condition, scored at 5/10, shows both positives and a clear point to watch. On the good side, RRC has an acceptable debt-to-equity ratio and its debt compared to free cash flow is better than almost 80% of similar companies, suggesting a stable long-term financial position. However, investors should see a cash flow challenge: a current and quick ratio of 0.56 each shows possible trouble in meeting immediate bills without more incoming cash. For a value investor, this highlights the need to look past a single score and know the particular risks, here, the company's short-term cash position.
Growth Path: The Reason for Value Increase
For a low-priced stock to finally reach its calculated worth, there often must be a growth reason. RRC's Growth Score of 5/10 indicates a changing period with good forward signs.
While past income has had small decreases, the forward view is better. Analysts estimate average yearly income growth of 13.50% and EPS growth of 11.94% in the next years. This estimated increase is key; it gives a fundamental reason for the market to price the stock higher. Value investing is not only about buying unchanging companies at a low price, but often about spotting firms where getting better chances are not yet seen in the share price.
Summary and Next Steps
RANGE RESOURCES CORP (RRC) shows the kind of chance a value-focused search tries to find: a company with strong earnings, acceptable financial condition apart from cash flow, and a good growth view, all available at a price that seems low compared to both the market and its own industry. The stock's profile suggests it may be priced too low based on its future earnings possibility, a central idea of the value investing method.
Naturally, RRC is only one example that passed this particular group of filters. The "Decent Value" search is made to find a list of such possible chances in a systematic way. If you want to see other stocks that currently fit these conditions of good price along with acceptable fundamentals, you can see the full and current search results here.
Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any security. The review uses data and a set search method. Investors should do their own complete research, thinking about their personal money situation and risk comfort, before making any investment choices.
