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Are Investors Undervaluing Rakuten, Inc. (RKUNY) Right Now?

Zacks Equity Research
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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

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.

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.

Rakuten, Inc. (RKUNY) is a stock many investors are watching right now. RKUNY is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 22.55, which compares to its industry's average of 23.15. RKUNY's Forward P/E has been as high as 22.91 and as low as 12.22, with a median of 15.83, all within the past year.

Another notable valuation metric for RKUNY is its P/B ratio of 1.97. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. RKUNY's current P/B looks attractive when compared to its industry's average P/B of 4.42. Over the past year, RKUNY's P/B has been as high as 2.08 and as low as 1.46, with a median of 1.68.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. RKUNY has a P/S ratio of 1.43. This compares to its industry's average P/S of 2.22.

Finally, we should also recognize that RKUNY has a P/CF ratio of 6.32. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 18.87. Over the past 52 weeks, RKUNY's P/CF has been as high as 8.26 and as low as 4.67, with a median of 5.48.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Rakuten, Inc. Is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, RKUNY feels like a great value stock at the moment.


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