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How to Screen for Highly Ranked Undervalued Stocks

Tracey Ryniec
  • (0:30) - Using Zacks Ranking System To Find Top Value Stocks
  • (5:55) - Screen Criteria For Undervalue Stocks
  • (10:00) - Tracey’s Top Stocks Picks
  • (17:45) - Episode Roundup: C, CPA, LPLA, SNX, FL, BRK.B
  •                 Podcast@Zacks.com

Welcome to Episode #175 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

Volatility has picked up to start 2020 with earnings season and the coronavirus grabbing the headlines.

I know many investors like to use “system” style investing and that’s where the Zacks Rank comes in.

Why not use Zacks great Ranking systems to cut through the noise and find those cheap stocks?

Screening for Highly Ranked Undervalued Stocks

The screens always start with the Zacks Rank, in this case the highest ranks of #1 (Strong Buy) and #2 (Buy). It should, hopefully, mean rising earnings estimates.

But investors can layer the Zacks Style Scores on top of it. The Style Scores are included for an investing style, which includes value, growth or momentum. The screen included the top two scores of A or B for the value category.

The Zacks Industry Rank adds yet another layer of screening for the industries with rising estimates, as you can screen for industry ranks in the top 50%.

Throw in the P/E and PEG, as the classic valuation metrics, as well as a stock price over $5 to avoid those pesky penny stocks. I know, you like those $1 stocks, but we’re going to exclude them here.

25 stocks made it through this tight screen including in a bunch of different industries such as financials, drug makers, transports, retailers and energy.

Here are five.

5 Highly Ranked Undervalued Stocks for Your Short List

1.       Citigroup C is a Zacks Rank #2 (Buy). This big, international bank is cheap with a forward P/E of just 8.9. It has a PEG ratio of 0.8, which indicates it has both value and growth. It also pays a dividend, yielding 2.6%.

2.       Copa Holdings CPA is a passenger airline serving Latin America with its big hub in Panama. It has an Industry Rank of 34, which is the top 13% of all industries. It’s trading with a forward P/E of just 10.5.

3.       LPL Financial Holdings LPLA operates a financial advisory and brokerage business. Shares are still attractively valued with a forward P/E of just 12. It also has growth with a PEG ratio of just 0.8. Investors get a dividend, currently yielding 1.1%.

4.       SYNNEX SNX announced on Jan 9 that it would split into 2 companies: Concentrix and SYNNEX. It’s a Zacks Rank #1 (Strong Buy). It’s been cheap for some time, and currently has a forward P/E of just 10.

5.       Foot Locker FL is one of the cheap retailers, on a valuation basis. It trades with a forward P/E of just 7.8. It’s industry, apparel and shoes, ranks 94 out of 255, or in the top 37% of all industries. Investors are rewarded with a dividend, currently yielding 3.9%.

What else should you know about using the Zacks Rank to find undervalued stocks?

Tune into this week’s podcast to find out.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>


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Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
Citigroup Inc. (C) : Free Stock Analysis Report
 
SYNNEX Corporation (SNX) : Free Stock Analysis Report
 
LPL Financial Holdings Inc. (LPLA) : Free Stock Analysis Report
 
Foot Locker, Inc. (FL) : Free Stock Analysis Report
 
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