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Are Investors Undervaluing GNC (GNC) 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.

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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 GNC (GNC). GNC is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 6.71 right now. For comparison, its industry sports an average P/E of 8.96. GNC's Forward P/E has been as high as 11.21 and as low as 2.44, with a median of 5.71, all within the past year.

Finally, investors should note that GNC has a P/CF ratio of 2.65. 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 company's current P/CF looks solid when compared to its industry's average P/CF of 7.08. Over the past year, GNC's P/CF has been as high as 3.28 and as low as -2.74, with a median of 1.78.

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


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Zacks Investment Research