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.
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 Builders FirstSource (BLDR). BLDR 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 11.84 right now. For comparison, its industry sports an average P/E of 19.37. BLDR's Forward P/E has been as high as 12.56 and as low as 5.62, with a median of 8.65, all within the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. BLDR has a P/S ratio of 0.41. This compares to its industry's average P/S of 0.48.
Finally, we should also recognize that BLDR has a P/CF ratio of 8.96. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. BLDR's P/CF compares to its industry's average P/CF of 14.44. Over the past year, BLDR's P/CF has been as high as 8.96 and as low as 4.13, with a median of 5.96.
These are only a few of the key metrics included in Builders FirstSource's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, BLDR looks like an impressive value stock at the moment.
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Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
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