The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
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 DXC Technology (DXC). DXC is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 6.67 right now. For comparison, its industry sports an average P/E of 15.78. Over the last 12 months, DXC's Forward P/E has been as high as 12.97 and as low as 5.66, with a median of 10.46.
Investors should also note that DXC holds a PEG ratio of 1.16. 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. DXC's PEG compares to its industry's average PEG of 1.39. Within the past year, DXC's PEG has been as high as 1.54 and as low as 0.90, with a median of 1.11.
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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. DXC has a P/S ratio of 0.73. This compares to its industry's average P/S of 2.12.
These are only a few of the key metrics included in DXC Technology'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, DXC looks like an impressive value stock at the moment.
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