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Are Investors Undervaluing Arcosa (ACA) Right Now?

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Zacks Equity Research
·2 min read
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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.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company to watch right now is Arcosa (ACA). ACA 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 17.89 right now. For comparison, its industry sports an average P/E of 18.75. Over the last 12 months, ACA's Forward P/E has been as high as 20.08 and as low as 11.16, with a median of 15.51.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. ACA has a P/S ratio of 1.11. This compares to its industry's average P/S of 1.19.

Finally, we should also recognize that ACA has a P/CF ratio of 9.42. 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. ACA's current P/CF looks attractive when compared to its industry's average P/CF of 16.63. Over the past year, ACA's P/CF has been as high as 11.59 and as low as 7.32, with a median of 9.42.

These are just a handful of the figures considered in Arcosa's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that ACA is an impressive value stock right now.


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