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Is United States Cellular (USM) Stock Undervalued Right Now?

Zacks Equity Research
·3 min read

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.

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 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 company value investors might notice is United States Cellular (USM). USM is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A.

We should also highlight that USM has a P/B ratio of 0.58. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. USM's current P/B looks attractive when compared to its industry's average P/B of 1.69. Over the past 12 months, USM's P/B has been as high as 0.75 and as low as 0.52, with a median of 0.62.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. USM has a P/S ratio of 0.65. This compares to its industry's average P/S of 1.3.

Finally, our model also underscores that USM has a P/CF ratio of 2.82. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 5.58. Over the past year, USM's P/CF has been as high as 3.88 and as low as 2.67, with a median of 3.15.

These figures are just a handful of the metrics value investors tend to look at, but they help show that United States Cellular is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, USM feels like a great value stock at the moment.

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