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Are Investors Undervaluing Exfo (EXFO) 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 use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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.

Exfo (EXFO) is a stock many investors are watching right now. EXFO is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 20.04. This compares to its industry's average Forward P/E of 26.04. Over the past 52 weeks, EXFO's Forward P/E has been as high as 25.74 and as low as 11.11, with a median of 15.73.

Another notable valuation metric for EXFO is its P/B ratio of 1.31. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 3.27. Over the past 12 months, EXFO's P/B has been as high as 1.36 and as low as 0.85, with a median of 1.08.

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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. EXFO has a P/S ratio of 0.8. This compares to its industry's average P/S of 1.43.

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


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