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Are Investors Undervaluing ARC Document Solutions (ARC) Right Now?

Zacks Equity Research

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 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 company to watch right now is ARC Document Solutions (ARC). ARC is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 12.06 right now. For comparison, its industry sports an average P/E of 16.11. ARC's Forward P/E has been as high as 23.91 and as low as 10.34, with a median of 18.67, 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. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. ARC has a P/S ratio of 0.26. This compares to its industry's average P/S of 0.5.

Finally, our model also underscores that ARC has a P/CF ratio of 2.02. 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. ARC's P/CF compares to its industry's average P/CF of 6.71. Within the past 12 months, ARC's P/CF has been as high as 5.44 and as low as 1.83, with a median of 3.36.

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


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