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Is the Premier Oil share price still good value?

17th May by Jack Brumby

Mid cap Oil & Gas explorer and producer Premier Oil (LON:PMO)has seen its share price recover on the back of a stabilising oil price and a well received recent trading update - but by many conventional measures, its stock is still cheap.

Stacks of academic research covering different time frames and regions of the world all come to the same conclusion: over time and on average, cheap stocks outperform expensive stocks.

One of the masters of value (and factor) investing is Jim O'Shaughnessy, the founder of O’Shaughnessy Asset Management (OSAM). In the 4th edition of his groundbreaking investment research tome What Works on Wall St, O’Shaughnessy showed that composite value factors based on a mix of metrics dramatically beat the market over a multi-decade period.

It was from this robust insight that Stockopedia’s Value Rank was born, its synergy coming from the following simple valuation ratios:

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

How does Premier Oil stack up?

GET MORE DATA-DRIVEN INSIGHTS INTO LON:PMO »

Premier Oil's Value Rank

We can see by using Premier Oil’s StockReport that the group has a:

  • Rolling price to book value of 1.03,
  • Rolling price to earnings ratio of 12.0
  • Trailing twelve-month price to free cash flow of 2.37
  • Rolling dividend yield of 0.000%
  • Trailing twelve-month price to sales ratio of 0.75

When we add all of these together, we find that Premier Oil has a Value Rank of 82. Investing in high-value stocks requires finesse and a sturdy constitution but, when cheap stocks come good, the payoff can be large and sudden.

Premier Oil’s Value Rank of 82 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 Premier Oil’s Value Rank alongside its Momentum and Quality Ranks. You can see these Ranks on the group's StockReport page.

Combining Value with Quality or Momentum is a proven strategy for success over longer time frames. That's why we have constructed our StockReports to give an instant impression of how well exposed Premier Oil (LON:PMO) is to these factors.

We go into greater detail on factor investing in this video. Stockopedia helps you to identify return-enhancing factors such as Quality, Value and Momentum by analysing thousands of data points every day. To find out more about the work we do in this space, you can download our free ebook covering everything you need to know about Value Investing.

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Share Price
84.32p
Change Today
2.83%
Premier Oil ( )

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