Should Value Investors Buy Northwest Natural (NWN) Stock?

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now is Northwest Natural (NWN). NWN is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 13.64. This compares to its industry's average Forward P/E of 19.74. Over the last 12 months, NWN's Forward P/E has been as high as 17.00 and as low as 13.15, with a median of 14.01.

Another notable valuation metric for NWN is its P/B ratio of 1.15. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.31. Over the past year, NWN's P/B has been as high as 1.25 and as low as 1.09, with a median of 1.15.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. NWN has a P/S ratio of 1.37. This compares to its industry's average P/S of 1.61.

Finally, investors should note that NWN has a P/CF ratio of 5.92. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. NWN's current P/CF looks attractive when compared to its industry's average P/CF of 9.80. Within the past 12 months, NWN's P/CF has been as high as 7.39 and as low as 5.62, with a median of 6.57.

These are only a few of the key metrics included in Northwest Natural's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, NWN looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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