Why Bargain-Hunting Investors Need to Look Closer at Chevron Stock

Shares of  (NYSE: CVX) hit an all-time high of nearly $190 a share earlier this year. While the oil giant has come off its peak, shares are up about 70% over the last three years and remain significantly above the average trading price over the past decade. That might have value investors thinking the stock isn't worth their time. 

However, a closer look at a key valuation metric tells a different story: Chevron is a lot cheaper than it appears. That should make the oil stock appealing to bargain-hunting investors.

Investors have many ways to value a stock. One of my favorite valuation methods is to look at a company's free cash flow yield. Free cash flow is the money a company generates that it can use to create value for investors by paying dividends, investing in growth (e.g., capital expenditures or acquisitions), repaying debt, or repurchasing shares. The higher the free cash flow yield, the less investors are paying for the free cash flow and the faster the investment payback period. 

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Source Fool.com