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, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. 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 company value investors might notice is McKesson (MCK). MCK is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 9.63. This compares to its industry's average Forward P/E of 16.13. MCK's Forward P/E has been as high as 11.72 and as low as 7.78, with a median of 9.56, all within the past year.
MCK is also sporting a PEG ratio of 1.36. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. MCK's industry currently sports an average PEG of 1.80. MCK's PEG has been as high as 1.46 and as low as 1.12, with a median of 1.33, all within the past year.
Another valuation metric that we should highlight is MCK's P/B ratio of 2.77. Investors use the P/B ratio to look at a stock's market value versus 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 2.92. Over the past 12 months, MCK's P/B has been as high as 3.24 and as low as 2.22, with a median of 2.69.
Finally, investors will want to recognize that MCK has a P/CF ratio of 8.81. 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. MCK's P/CF compares to its industry's average P/CF of 13.86. Over the past year, MCK's P/CF has been as high as 10.07 and as low as 4.59, with a median of 7.81.
These are only a few of the key metrics included in McKesson's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, MCK looks like an impressive value stock at the moment.
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