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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 is undervalued for 3 valuation factors by 15% to 30% relative to historical averages. It is close to its historical average in profitability measured by median ROE. Paper/Wood and Metals/Mining are moderately overpriced and a bit above their baselines in profitability. Other industries in Energy and Materials are more overvalued. Packaging is the most overpriced combining all valuation metrics, but profitability is far above the historical average. At the opposite, profitability in Energy Equipment and Services is far below the baseline and can't be held as a justification for overpricing.

Anyway, I think systemic risk is more important than market valuation to manage a portfolio.

Since last month:

  • P/E has improved in Chemicals and Construction Materials, no significant change in other industries.

  • P/S has improved in Energy, Construction Materials, Packaging and deteriorated in Chemicals.

  • P/FCF has improved in groups except a moderate deterioration in Energy Equipment/Services.

  • ROE has improved in Construction Materials, Metals/Mining, no significant change elsewhere.

  • The SPDR Select Sector ETF in Energy (NYSEARCA:XLE) has outperformed the SPDR S&P 500 ETF (SPY) by about 4% and the Materials ETF (NYSEARCA:XLB) has lagged it by about 1%.

  • The five S&P 500 stocks in Energy and Materials with the best momentum in 1 month are Andeavor (ANDV), Apache Corp. (APA), ConocoPhillips (COP), Hess Corp. (HES), Marathon Petroleum Corp. (MPC).

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. Quantitative Risk & Value members

This article was written by

Fred Piard profile picture
Data-driven portfolios and risk indicators.
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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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