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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. 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 company to watch right now is Big Lots (BIG). BIG is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 9.90. This compares to its industry's average Forward P/E of 24.40. Over the past 52 weeks, BIG's Forward P/E has been as high as 12.62 and as low as 3.32, with a median of 6.33.
Investors should also note that BIG holds a PEG ratio of 1.40. 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. BIG's industry currently sports an average PEG of 2.48. Over the last 12 months, BIG's PEG has been as high as 1.57 and as low as 0.50, with a median of 0.89.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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. BIG has a P/S ratio of 0.29. This compares to its industry's average P/S of 0.84.
Value investors will likely look at more than just these metrics, but the above data helps show that Big Lots is likely undervalued currently. And when considering the strength of its earnings outlook, BIG sticks out at as one of the market's strongest value stocks.
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