Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
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.
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 Builders FirstSource (BLDR). BLDR is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 6.78. This compares to its industry's average Forward P/E of 15.52. Over the last 12 months, BLDR's Forward P/E has been as high as 14.30 and as low as 4.54, with a median of 10.20.
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 prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. BLDR has a P/S ratio of 0.47. This compares to its industry's average P/S of 0.58.
Finally, investors will want to recognize that BLDR has a P/CF ratio of 4.64. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 12.36. BLDR's P/CF has been as high as 9.43 and as low as 3.30, with a median of 6.12, all within the past year.
These are just a handful of the figures considered in Builders FirstSource'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 BLDR is an impressive value stock right now.
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Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
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