While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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 value investors might notice is MainStreet Bank (MNSB). MNSB is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 5.75, which compares to its industry's average of 6.89. Over the past year, MNSB's Forward P/E has been as high as 9.83 and as low as 5.75, with a median of 7.91.
Another notable valuation metric for MNSB is its P/B ratio of 0.90. The P/B ratio pits a stock's market value against 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 1.08. MNSB's P/B has been as high as 1.33 and as low as 0.90, with a median of 1.16, over the past year.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. MNSB has a P/S ratio of 1.57. This compares to its industry's average P/S of 1.92.
Finally, we should also recognize that MNSB has a P/CF ratio of 4.78. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 9.73. Within the past 12 months, MNSB's P/CF has been as high as 8.16 and as low as 4.78, with a median of 7.40.
These figures are just a handful of the metrics value investors tend to look at, but they help show that MainStreet Bank is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, MNSB feels like a great value stock at the moment.
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