Are Investors Undervaluing Textron (TXT) Right Now?
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.
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.
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.
Textron (TXT) is a stock many investors are watching right now. TXT is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 13.34, which compares to its industry's average of 22.42. Over the last 12 months, TXT's Forward P/E has been as high as 18.19 and as low as 13.10, with a median of 15.35.
TXT is also sporting a PEG ratio of 1.19. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TXT's industry has an average PEG of 1.58 right now. Over the last 12 months, TXT's PEG has been as high as 1.55 and as low as 0.98, with a median of 1.17.
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. TXT has a P/S ratio of 1.07. This compares to its industry's average P/S of 1.53.
Finally, investors should note that TXT has a P/CF ratio of 11.29. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. TXT's P/CF compares to its industry's average P/CF of 45.01. Over the past 52 weeks, TXT's P/CF has been as high as 14.91 and as low as 10.05, with a median of 11.95.
Value investors will likely look at more than just these metrics, but the above data helps show that Textron is likely undervalued currently. And when considering the strength of its earnings outlook, TXT sticks out at as one of the market's strongest value stocks.
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