Is Lloyds Banking Group (LYG) a Great Value Stock Right Now?
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 use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One company to watch right now is Lloyds Banking Group (LYG). LYG is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 6.13. This compares to its industry's average Forward P/E of 7.57. LYG's Forward P/E has been as high as 9.47 and as low as 5.48, with a median of 6.96, all within the past year.
Investors should also note that LYG holds a PEG ratio of 0.20. 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. LYG's PEG compares to its industry's average PEG of 0.45. Over the last 12 months, LYG's PEG has been as high as 0.30 and as low as 0.18, with a median of 0.22.
Another valuation metric that we should highlight is LYG's P/B ratio of 0.60. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.36. LYG's P/B has been as high as 0.73 and as low as 0.50, with a median of 0.59, over the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. LYG has a P/S ratio of 1.21. This compares to its industry's average P/S of 1.28.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Lloyds Banking Group is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, LYG feels like a great value stock at the moment.
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