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Is China Distance (DL) a Great Value Stock Right Now?

Zacks Equity Research

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.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now is China Distance (DL). DL is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.

DL is also sporting a PEG ratio of 0.47. 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. DL's PEG compares to its industry's average PEG of 0.88. DL's PEG has been as high as 0.62 and as low as 0.47, with a median of 0.55, all within the past year.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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. DL has a P/S ratio of 0.76. This compares to its industry's average P/S of 1.19.

These figures are just a handful of the metrics value investors tend to look at, but they help show that China Distance is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, DL feels like a great value stock at the moment.


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Zacks Investment Research