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Are Investors Undervaluing Ducommun (DCO) Right Now?

Zacks Equity Research

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, value investing is easily one of the most popular ways to find great stocks in any market environment. 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 company to watch right now is Ducommun (DCO). DCO is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 17.59, while its industry has an average P/E of 19.17. DCO's Forward P/E has been as high as 37.70 and as low as 15.30, with a median of 18.13, all within the past year.

We should also highlight that DCO has a P/B ratio of 1.94. The P/B is a method of comparing a stock's market value to 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 5.12. Over the past year, DCO's P/B has been as high as 2.26 and as low as 1.51, with a median of 1.81.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. DCO has a P/S ratio of 0.78. This compares to its industry's average P/S of 1.85.

Finally, investors should note that DCO has a P/CF ratio of 11.51. 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. DCO's current P/CF looks attractive when compared to its industry's average P/CF of 17.02. DCO's P/CF has been as high as 15.79 and as low as 9.37, with a median of 11.57, all within the past year.

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


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