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Are Investors Undervaluing Turtle Beach (HEAR) Right Now?

Zacks Equity Research
Chipotle (CMG) delivered earnings and revenue surprises of 8.13% and 2.06%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

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 use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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.

Turtle Beach (HEAR) is a stock many investors are watching right now. HEAR is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 8.95 right now. For comparison, its industry sports an average P/E of 21.38. HEAR's Forward P/E has been as high as 47.23 and as low as 5.40, with a median of 10.26, all within the past year.

We also note that HEAR holds a PEG ratio of 0.99. 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. HEAR's PEG compares to its industry's average PEG of 1.89. Within the past year, HEAR's PEG has been as high as 1.78 and as low as 0.36, with a median of 0.65.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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. HEAR has a P/S ratio of 0.48. This compares to its industry's average P/S of 1.3.

Finally, our model also underscores that HEAR has a P/CF ratio of 2.82. 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. HEAR's current P/CF looks attractive when compared to its industry's average P/CF of 8.18. Within the past 12 months, HEAR's P/CF has been as high as 19.02 and as low as 2.82, with a median of 6.62.

These are just a handful of the figures considered in Turtle Beach's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that HEAR is an impressive value stock right now.


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