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Are Investors Undervaluing Capital One (COF) 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.

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.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is Capital One (COF). COF is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A.

Investors should also recognize that COF has a P/B ratio of 0.73. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. COF's current P/B looks attractive when compared to its industry's average P/B of 0.88. Over the past year, COF's P/B has been as high as 0.90 and as low as 0.66, with a median of 0.77.

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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. COF has a P/S ratio of 1.28. This compares to its industry's average P/S of 1.38.

Value investors will likely look at more than just these metrics, but the above data helps show that Capital One is likely undervalued currently. And when considering the strength of its earnings outlook, COF sticks out at as one of the market's strongest value stocks.


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