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.
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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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.
One stock to keep an eye on is Methode Electronics (MEI). MEI is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 12.62. This compares to its industry's average Forward P/E of 26.08. Over the past 52 weeks, MEI's Forward P/E has been as high as 16.06 and as low as 11.93, with a median of 13.35.
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. MEI has a P/S ratio of 1.34. This compares to its industry's average P/S of 2.76.
Finally, investors will want to recognize that MEI has a P/CF ratio of 9.46. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. MEI's current P/CF looks attractive when compared to its industry's average P/CF of 23.44. Within the past 12 months, MEI's P/CF has been as high as 11.04 and as low as 8.61, with a median of 9.99.
Value investors will likely look at more than just these metrics, but the above data helps show that Methode Electronics is likely undervalued currently. And when considering the strength of its earnings outlook, MEI sticks out at as one of the market's strongest value stocks.
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Methode Electronics, Inc. (MEI) : Free Stock Analysis Report
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