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Should Value Investors Buy Aaron's (AAN) Stock?

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.

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.

One company to watch right now is Aaron's (AAN). AAN is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value.

AAN is also sporting a PEG ratio of 1. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AAN's industry has an average PEG of 1.04 right now. Over the last 12 months, AAN's PEG has been as high as 1.04 and as low as 0.75, with a median of 0.92.

Another valuation metric that we should highlight is AAN's P/B ratio of 2.33. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. AAN's current P/B looks attractive when compared to its industry's average P/B of 3.76. Within the past 52 weeks, AAN's P/B has been as high as 2.40 and as low as 1.54, with a median of 1.96.

Finally, our model also underscores that AAN has a P/CF ratio of 2.03. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. AAN's current P/CF looks attractive when compared to its industry's average P/CF of 6.40. AAN's P/CF has been as high as 2.09 and as low as 1.34, with a median of 1.74, all within the past year.

These are just a handful of the figures considered in Aaron's's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that AAN is an impressive value stock right now.


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