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, value investing is easily one of the most popular ways to find great stocks in any market environment. 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 stock to keep an eye on is Takeda Pharmaceutical Co. (TAK). TAK is currently sporting a Zacks Rank of #2 (Buy) and an A for Value.
Another valuation metric that we should highlight is TAK's P/B ratio of 0.89. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 1.14. Over the past year, TAK's P/B has been as high as 1.17 and as low as 0.87, with a median of 1.02.
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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. TAK has a P/S ratio of 1.43. This compares to its industry's average P/S of 2.69.
Finally, investors should note that TAK has a P/CF ratio of 6.62. 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 8.07. Over the past 52 weeks, TAK's P/CF has been as high as 8.14 and as low as 6.47, with a median of 7.14.
Value investors will likely look at more than just these metrics, but the above data helps show that Takeda Pharmaceutical Co. Is likely undervalued currently. And when considering the strength of its earnings outlook, TAK sticks out at as one of the market's strongest value stocks.
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