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Are Investors Undervaluing Steelcase (SCS) Right Now?

Zacks Equity Research

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.

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

Another notable valuation metric for SCS is its P/B ratio of 2.30. 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 3.21. Over the past year, SCS's P/B has been as high as 2.52 and as low as 1.93, with a median of 2.30.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. SCS has a P/S ratio of 0.56. This compares to its industry's average P/S of 0.84.

Finally, we should also recognize that SCS has a P/CF ratio of 9.44. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 14.09. SCS's P/CF has been as high as 12.58 and as low as 8.29, with a median of 9.76, all within the past year.

These are only a few of the key metrics included in Steelcase's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, SCS looks like an impressive value stock at the moment.


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Zacks Investment Research