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Are Investors Undervaluing Meritor (MTOR) Right Now?

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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.

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 company to watch right now is Meritor (MTOR). MTOR is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A.

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. MTOR has a P/S ratio of 0.63. This compares to its industry's average P/S of 0.71.

Finally, investors should note that MTOR has a P/CF ratio of 5.70. 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 8.82. MTOR's P/CF has been as high as 6.32 and as low as 1.85, with a median of 4.50, all within the past year.

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


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Zacks Investment Research