Are Investors Undervaluing China Eastern (CEA) Right Now?
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
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 stock to keep an eye on is China Eastern (CEA). CEA is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 7.18. This compares to its industry's average Forward P/E of 9.14. Over the past year, CEA's Forward P/E has been as high as 34.04 and as low as 7.18, with a median of 10.98.
CEA is also sporting a PEG ratio of 0.29. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CEA's industry currently sports an average PEG of 0.39. Within the past year, CEA's PEG has been as high as 2.27 and as low as -11.35, with a median of 0.31.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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. CEA has a P/S ratio of 0.45. This compares to its industry's average P/S of 0.63.
Finally, our model also underscores that CEA has a P/CF ratio of 2.96. 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. This stock's P/CF looks attractive against its industry's average P/CF of 6.47. Within the past 12 months, CEA's P/CF has been as high as 4.45 and as low as 2.66, with a median of 3.24.
These figures are just a handful of the metrics value investors tend to look at, but they help show that China Eastern is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CEA feels like a great value stock at the moment.
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