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Should Value Investors Pick Black Stone Minerals Stock Now?

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 Black Stone Minerals, L.P. BSM 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, Black Stone Minerals has a trailing twelve months PE ratio of almost 20, as you can see in the chart below:



This level actually compares slightly favorably with the market at large, as the PE for the S&P 500 stands at about 20.8. If we focus on the long-term PE trend, Black Stone Minerals’ current PE level puts it below its midpoint over the past one year, with the number remaining stable over the past few months. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.



Further, the stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 28. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.




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, Black Stone Minerals has a P/S ratio of about 4.4. This is higher than the S&P 500 average, which comes in at 3.3 right now. Nevertheless, as we can see in the chart below, this is well below the highs for this stock in particular over the past one year.



If anything, BSM is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, Black Stone Minerals currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Black Stone Minerals a solid choice for value investors.

What About the Stock Overall?

Though Black Stone Minerals 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 grade of C and a Momentum score of B. This gives BSM a Zacks VGM score—or its overarching fundamental grade—of B. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen no estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen two upward and zero downward revisions in the same time period.

As a result, the current quarter consensus estimate has fallen by 5.3% in the past two months, while the full year estimate has decreased 7.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

This somewhat bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

Black Stone Minerals is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 26% out of more than 250 industries) further supports the growth potential of the stock. In fact, over the past two years, the industry has outperformed the broader market, as you can see below:



However, with a Zacks Rank #3, it is hard to get too excited about this company overall. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick. Moreover, broader factors at the industry level support the growth potential of the company as well.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

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