Are Investors Undervaluing Associated BancCorp (ASB) Right Now?
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.
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.
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 value investors might notice is Associated BancCorp (ASB). ASB is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 8.93 right now. For comparison, its industry sports an average P/E of 9.31. ASB's Forward P/E has been as high as 60.72 and as low as 8.70, with a median of 11.82, all within the past year.
Another valuation metric that we should highlight is ASB's P/B ratio of 0.80. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 1.99. ASB's P/B has been as high as 1.01 and as low as 0.70, with a median of 0.87, over 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. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ASB has a P/S ratio of 2.67. This compares to its industry's average P/S of 2.71.
Finally, investors will want to recognize that ASB has a P/CF ratio of 6.89. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 15.36. Over the past year, ASB's P/CF has been as high as 8.12 and as low as 6.05, with a median of 7.21.
If you're looking for another solid Banks - Midwest value stock, take a look at Mercantile Bank (MBWM). MBWM is a # 2 (Buy) stock with a Value score of A.
Mercantile Bank sports a P/B ratio of 1.10 as well; this compares to its industry's price-to-book ratio of 1.99. In the past 52 weeks, MBWM's P/B has been as high as 1.35, as low as 1.09, with a median of 1.22.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Associated BancCorp and Mercantile Bank are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ASB and MBWM feels like a great value stock at the moment.
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