Are Investors Undervaluing These Basic Materials Stocks Right Now?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore 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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 company to watch right now is Orion Engineered Carbons (OEC). OEC is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock has a Forward P/E ratio of 7.65. This compares to its industry's average Forward P/E of 12.32. Over the past 52 weeks, OEC's Forward P/E has been as high as 14.29 and as low as 7.13, with a median of 9.45.
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 prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. OEC has a P/S ratio of 0.76. This compares to its industry's average P/S of 0.95.
Finally, investors should note that OEC has a P/CF ratio of 4.50. 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. OEC's current P/CF looks attractive when compared to its industry's average P/CF of 11.41. Over the past 52 weeks, OEC's P/CF has been as high as 11.05 and as low as 4.16, with a median of 4.97.
Tronox (TROX) may be another strong Chemical - Diversified stock to add to your shortlist. TROX is a # 2 (Buy) stock with a Value grade of A.
Tronox also has a P/B ratio of 1.85 compared to its industry's price-to-book ratio of 2.53. Over the past year, its P/B ratio has been as high as 2.02, as low as 1.10, with a median of 1.69.
Value investors will likely look at more than just these metrics, but the above data helps show that Orion Engineered Carbons and Tronox are likely undervalued currently. And when considering the strength of its earnings outlook, OEC and TROX sticks out as one of the market's strongest value stocks.
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Orion Engineered Carbons S.A (OEC) : Free Stock Analysis Report
Tronox Holdings PLC (TROX) : Free Stock Analysis Report
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