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Are Investors Undervaluing Legg Mason (LM) Right Now?

Zacks Equity Research
Glu Mobile (GLUU) closed the most recent trading day at $7.41, moving -0.27% from the previous trading session.

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.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

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

LM is also sporting a PEG ratio of 0.72. 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. LM's PEG compares to its industry's average PEG of 1.10. LM's PEG has been as high as 0.90 and as low as -4.02, with a median of 0.54, all within the past year.

Another notable valuation metric for LM is its P/B ratio of 0.79. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.81. Over the past 12 months, LM's P/B has been as high as 0.87 and as low as 0.51, with a median of 0.69.

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. LM has a P/S ratio of 0.97. This compares to its industry's average P/S of 2.71.

Finally, our model also underscores that LM has a P/CF ratio of 7.75. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. LM's P/CF compares to its industry's average P/CF of 12.81. Over the past year, LM's P/CF has been as high as 9.31 and as low as 5.41, with a median of 7.02.

These are just a handful of the figures considered in Legg Mason's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that LM is an impressive value stock right now.


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