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Should Value Investors Buy American Equity Investment (AEL) Stock?

Zacks Equity Research

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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 American Equity Investment (AEL). AEL is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 7.71 right now. For comparison, its industry sports an average P/E of 9.49. Over the past 52 weeks, AEL's Forward P/E has been as high as 10.49 and as low as 6.07, with a median of 8.65.

Another valuation metric that we should highlight is AEL's P/B ratio of 0.94. 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 1.75. AEL's P/B has been as high as 1.39 and as low as 0.84, with a median of 1.20, over the past year.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. AEL has a P/S ratio of 0.84. This compares to its industry's average P/S of 0.86.

Value investors will likely look at more than just these metrics, but the above data helps show that American Equity Investment is likely undervalued currently. And when considering the strength of its earnings outlook, AEL sticks out at as one of the market's strongest value stocks.


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