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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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
Dow Inc. (DOW) is a stock many investors are watching right now. DOW is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 9.20 right now. For comparison, its industry sports an average P/E of 12.65. DOW's Forward P/E has been as high as 29.56 and as low as 8.89, with a median of 19.29, all within the past year.
Investors should also note that DOW holds a PEG ratio of 0.33. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DOW's PEG compares to its industry's average PEG of 0.64. Over the past 52 weeks, DOW's PEG has been as high as 8.89 and as low as 0.32, with a median of 4.24.
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 prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. DOW has a P/S ratio of 0.98. This compares to its industry's average P/S of 1.06.
Finally, investors should note that DOW has a P/CF ratio of 9.25. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 10.71. Within the past 12 months, DOW's P/CF has been as high as 81.12 and as low as 8.95, with a median of 11.48.
Value investors will likely look at more than just these metrics, but the above data helps show that Dow Inc. Is likely undervalued currently. And when considering the strength of its earnings outlook, DOW sticks out at as one of the market's strongest value stocks.
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