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Is Applied Optoelectronics (AAOI) a Great Value Stock Right Now?

Zacks Equity Research
BCB Bancorp (BCBP) delivered earnings and revenue surprises of 7.14% and -2.34%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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 company to watch right now is Applied Optoelectronics (AAOI). AAOI is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A.

Investors will also notice that AAOI has a PEG ratio of 0.78. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AAOI's industry currently sports an average PEG of 1.08. Over the past 52 weeks, AAOI's PEG has been as high as 1.64 and as low as 0.51, with a median of 0.83.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. AAOI has a P/S ratio of 1.19. This compares to its industry's average P/S of 1.78.

Finally, our model also underscores that AAOI has a P/CF ratio of 8.24. 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. AAOI's P/CF compares to its industry's average P/CF of 13.92. Over the past 52 weeks, AAOI's P/CF has been as high as 16.07 and as low as 5.05, with a median of 9.73.

These are just a handful of the figures considered in Applied Optoelectronics's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that AAOI is an impressive value stock right now.


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