Are Investors Undervaluing Ally Financial (ALLY) Right Now?
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.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 stock to keep an eye on is Ally Financial (ALLY). ALLY is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 2.95 right now. For comparison, its industry sports an average P/E of 8.24. ALLY's Forward P/E has been as high as 8.73 and as low as 2.68, with a median of 7.67, all within the past year.
Another valuation metric that we should highlight is ALLY's P/B ratio of 0.34. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 0.90. Over the past 12 months, ALLY's P/B has been as high as 0.96 and as low as 0.31, with a median of 0.85.
Finally, investors will want to recognize that ALLY has a P/CF ratio of 1.52. 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 5.05. Over the past year, ALLY's P/CF has been as high as 4.44 and as low as 1.37, with a median of 3.94.
Value investors will likely look at more than just these metrics, but the above data helps show that Ally Financial is likely undervalued currently. And when considering the strength of its earnings outlook, ALLY sticks out at as one of the market's strongest value stocks.
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