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Is Rent-A-Center (RCII) Stock Undervalued Right Now?

Zacks Equity Research

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.

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 value investors might notice is Rent-A-Center (RCII). RCII is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 10.28 right now. For comparison, its industry sports an average P/E of 14.23. Over the last 12 months, RCII's Forward P/E has been as high as 18.02 and as low as 9.32, with a median of 10.73.

We should also highlight that RCII has a P/B ratio of 3.59. 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. RCII's current P/B looks attractive when compared to its industry's average P/B of 6.12. Over the past 12 months, RCII's P/B has been as high as 4.89 and as low as 2.46, with a median of 3.58.

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. RCII has a P/S ratio of 0.53. This compares to its industry's average P/S of 0.77.

These are only a few of the key metrics included in Rent-A-Center'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, RCII looks like an impressive value stock at the moment.


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