U.S. Markets closed

Is ADT (ADT) Stock Undervalued Right Now?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is ADT (ADT). ADT is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 5.25. This compares to its industry's average Forward P/E of 15.52. Over the last 12 months, ADT's Forward P/E has been as high as 9.03 and as low as 5.25, with a median of 6.90.

Investors should also note that ADT holds a PEG ratio of 0.60. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ADT's PEG compares to its industry's average PEG of 1.57. ADT's PEG has been as high as 0.77 and as low as 0.36, with a median of 0.49, all within the past year.

Another valuation metric that we should highlight is ADT's P/B ratio of 0.95. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.88. Within the past 52 weeks, ADT's P/B has been as high as 1.57 and as low as 0.95, with a median of 1.25.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. ADT has a P/S ratio of 0.8. This compares to its industry's average P/S of 1.28.

Finally, investors should note that ADT has a P/CF ratio of 2.64. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 9.52. Over the past 52 weeks, ADT's P/CF has been as high as 4.46 and as low as 2.17, with a median of 3.13.

These figures are just a handful of the metrics value investors tend to look at, but they help show that ADT is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ADT feels like a great value stock at the moment.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
ADT Inc. (ADT) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research