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Is AmerisourceBergen (ABC) Stock Undervalued Right Now?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is AmerisourceBergen (ABC). ABC is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 10.94, which compares to its industry's average of 15.79. Over the past 52 weeks, ABC's Forward P/E has been as high as 14.32 and as low as 10.10, with a median of 11.59.

We also note that ABC holds a PEG ratio of 1.38. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ABC's industry currently sports an average PEG of 1.64. Over the past 52 weeks, ABC's PEG has been as high as 1.66 and as low as 1.10, with a median of 1.39.

Finally, we should also recognize that ABC has a P/CF ratio of 11.43. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 13.13. Over the past year, ABC's P/CF has been as high as 12.92 and as low as 6.91, with a median of 10.29.

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


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