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Is United Continental (UAL) a Great Value Stock Right Now?

Zacks Equity Research
Applied Industrial Technologies (AIT) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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.

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.

United Continental (UAL) is a stock many investors are watching right now. UAL is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 8.06 right now. For comparison, its industry sports an average P/E of 8.84. UAL's Forward P/E has been as high as 9.80 and as low as 7.49, with a median of 8.67, all within the past year.

Investors will also notice that UAL has a PEG ratio of 0.40. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. UAL's industry has an average PEG of 0.50 right now. Over the last 12 months, UAL's PEG has been as high as 0.47 and as low as 0.34, with a median of 0.44.

Another valuation metric that we should highlight is UAL's P/B ratio of 2.45. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 2.65. Within the past 52 weeks, UAL's P/B has been as high as 2.85 and as low as 2.12, with a median of 2.38.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. UAL has a P/S ratio of 0.58. This compares to its industry's average P/S of 0.72.

Finally, our model also underscores that UAL has a P/CF ratio of 5.72. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 5.96. UAL's P/CF has been as high as 6.04 and as low as 4.27, with a median of 5.19, 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 United Continental is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, UAL feels like a great value stock at the moment.


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