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Is NRG Energy (NRG) Stock Undervalued Right Now?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One stock to keep an eye on is NRG Energy (NRG). NRG is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock has a Forward P/E ratio of 6.87. This compares to its industry's average Forward P/E of 14.14. NRG's Forward P/E has been as high as 13.18 and as low as 6.78, with a median of 7.99, all within the past year.

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. NRG has a P/S ratio of 1.03. This compares to its industry's average P/S of 2.15.

Finally, our model also underscores that NRG has a P/CF ratio of 6.54. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. NRG's current P/CF looks attractive when compared to its industry's average P/CF of 6.65. Over the past year, NRG's P/CF has been as high as 14.34 and as low as -31.67, with a median of 11.26.

These are just a handful of the figures considered in NRG Energy's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that NRG is an impressive value stock right now.


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