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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One stock to keep an eye on is Penske Automotive (PAG). PAG is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 7.83, which compares to its industry's average of 7.89. PAG's Forward P/E has been as high as 10.37 and as low as 7, with a median of 8.98, all within the past year.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. PAG has a P/S ratio of 0.16. This compares to its industry's average P/S of 0.2.
Finally, investors should note that PAG has a P/CF ratio of 4.63. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. PAG's P/CF compares to its industry's average P/CF of 4.98. PAG's P/CF has been as high as 6 and as low as 4.09, with a median of 5.38, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Penske Automotive is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, PAG feels like a great value stock at the moment.