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Is Arch Coal (ARCH) a Great Value Stock 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.

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

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 Arch Coal (ARCH). ARCH is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 6.58 right now. For comparison, its industry sports an average P/E of 9.39. Over the past year, ARCH's Forward P/E has been as high as 8.85 and as low as 4.82, with a median of 6.45.

We should also highlight that ARCH has a P/B ratio of 1.60. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. ARCH's current P/B looks attractive when compared to its industry's average P/B of 3.94. Over the past 12 months, ARCH's P/B has been as high as 2.50 and as low as 1.55, with a median of 2.13.

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. ARCH has a P/S ratio of 0.47. This compares to its industry's average P/S of 1.05.

Value investors will likely look at more than just these metrics, but the above data helps show that Arch Coal is likely undervalued currently. And when considering the strength of its earnings outlook, ARCH sticks out at as one of the market's strongest value stocks.


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