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Are Investors Undervaluing Rent-A-Center (RCII) Right Now?

Zacks Equity Research

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.

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 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.

Rent-A-Center (RCII) is a stock many investors are watching right now. RCII is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock has a Forward P/E ratio of 10.36. This compares to its industry's average Forward P/E of 15.32. Over the last 12 months, RCII's Forward P/E has been as high as 18.02 and as low as 9.32, with a median of 11.44.

Another notable valuation metric for RCII is its P/B ratio of 3.53. 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 attractive against its industry's average P/B of 7.70. RCII's P/B has been as high as 4.89 and as low as 2.46, with a median of 3.37, over the past year.

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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. RCII has a P/S ratio of 0.52. This compares to its industry's average P/S of 0.82.

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


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