Is the BP share price still cheap despite a c60% gain?

Large cap integrated oil and gas operator BP (LON:BP.)has seen its shares rerate over the past two years or so. Even after this c60% increase, are BP shares undervalued? Our Value Rank suggests this might be the case. This Value Rank is made up of the following simple valuation ratios:

• Price to Book Value
• Price to Earnings
• Price to Free Cash Flow
• Dividend Yield %
• Price to Sales
• Earnings Yield %

Let's see how BP measures up.

The Value Rank: how does BP score?

We can see by using BP's StockReport that the group has a:

• Rolling price to book value of 1.41,
• Rolling price to earnings ratio of 11.1
• Trailing twelve-month price to free cash flow of 18.6
• Rolling dividend yield of 5.68%
• Trailing twelve-month price to sales ratio of 0.48

When we add all of these together, we find that Bp has a Value Rank of 77. Investing in high-value stocks requires finesse and a sturdy constitution but, when cheap stocks come good, the payoff can be large and sudden.

BP's Value Rank of 77 puts it in the cheapest quartile of the stock market. That is certainly a promising jumping off point for our analysis but it is not the whole story.

A smarter way to invest in value stocks is to find the best quality value stocks or value stocks whose share prices are turning around - history shows that you can do much better than a passive investor by combining factors, so it makes sense to consider BP's Value Rank alongside its Momentum and Quality Ranks. You can see these Ranks on the group's StockReport page.

What does this mean for potential investors?

Some of the best quality stocks in the market have defensible models that can deliver high levels of shareholder returns over the long term. But there are no guarantees and it's important to do your own research. Indeed, we've identified some areas of concern with BP that you can find out about here.