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Valuation Dashboard: Energy And Materials - Update


  • Valuation metrics in Energy and Materials.
  • Evolution since last month.
  • A list of stocks looking cheap in their industries.

This article series provides a monthly dashboard of industries in each sector of the GICS classification. It compares valuation and quality factors relative to their historical averages in each industry.

Executive summary

Integrated Oil/Gas looks close to fair price regarding valuation factors, but stays below the historical average and in negative territory for profitability measured by ROE. The Construction Materials industry is expensive for 2 valuation ratios, but has a Price to Free Cash Flow and a profitability (ROE) significantly better than historical averages. Other industries are even less attractive. The most overpriced groups according to valuation factors are Packaging and Paper/Wood, and the worst combination of valuation and profitability is Energy Equipment & Services. The energy sector's profitability will stay low as long as oil price stays low.

Since last month:

  • P/E has improved in Energy Equipment/Services, deteriorated in Construction Materials and is stable elsewhere.

  • P/S and P/FCF have improved in Metals/Mining and deteriorated elsewhere.

  • ROE is stable in most groups and deteriorated a bit in Metals/Mining and Packaging.

  • The SPDR Select Sector ETF in Energy (NYSEARCA:XLE) and Materials (XLB) have outperformed the SPDR S&P 500 ETF (SPY) by about 2% and 2.5%.

  • The five S&P 500 stocks in Energy and Materials with the best momentum in 1 month are CF Industries Holdings Inc (CF), Cabot Oil & Gas Corp (COG), Phillips 66 (PSX), Tesoro Corp (TSO), Valero Energy Corp (VLO).

Some cheap stocks in their industries

The stocks listed below are in the S&P 1500 index, cheaper than their respective industry factor for Price/Earnings, Price/Sales and Price/Free Cash Flow. The 10 companies with the highest Return on Equity are kept in the final selection. I update every month 8 lists like this one covering all sectors (some sectors are grouped). The 8 lists together have returned about

This article was written by

Fred Piard profile picture
Author of Quantitative Risk & Value and three books, I have been investing in systematic strategies since 2010. I have a PhD in computer science, an MSc in software engineering, an MSc in civil engineering and 30 years of professional experience in various sectors. My aim is making simple and efficient quantitative investing techniques available to my followers. Quantitative models can make investment decisions faster, reproducible and emotionless by focusing on relevant information in the middle of market noise. Moreover, models can be refined to meet specific risk tolerance and objectives. 

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I am an individual investor and an IT professional, not a finance professional. My writings are data analysis and opinions, not investment advice. They may contain inaccurate information, despite all the effort I put in them. Readers are responsible for all consequences of using information included in my work, and are encouraged to do their own research from various sources.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (5)

Long COP, SLCA, OXY, CVX, HES, CKH, SMHI, TTI, MRO, PTEN, FRAC, and TSO. Occidental Petroleum Corporation is an international oil and gas exploration and production company with operations in the United States, Middle East and Latin America. Headquartered in Houston, Occidental is one of the largest U.S. oil and gas companies, based on equity market capitalization. Occidental’s midstream and marketing segment gathers, processes, transports, stores, purchases and markets hydrocarbons and other commodities. The company’s wholly owned subsidiary OxyChem manufactures and markets basic chemicals and vinyls. Is a penny enough incentive to back a company testing a supertanker docking? Exports are a necessity to swamp OPEC control of price.
Great article, thanks.

I took a small position in energy equip and srvs. Thinking I'll re-evaluate after 2q earnings. While the PE and ROE are poor, PS and PFC look good. A lot of concern about increasing production of oil and gas in terms of the price trend, but it will be interesting to see if equip and srvs companies can make money on the increased production. Perhaps they are getting squeezed by their E and P customers, but It might just be that after the 2014-2015 production downturn they are leaner and offering some value add innovation.
Fred Piard profile picture
Thanks for your comment and best of luck.
Purchased XLE today at $63.99. If it goes lower, I will add to my position.
The XLE gains earlier this week have been erased.
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