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

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find 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.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

American Equity Investment (AEL) is a stock many investors are watching right now. AEL is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock is trading with a P/E ratio of 7.72, which compares to its industry's average of 9.38. AEL's Forward P/E has been as high as 8.64 and as low as 5.14, with a median of 6.95, all within the past year.

Another valuation metric that we should highlight is AEL's P/B ratio of 0.66. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. AEL's current P/B looks attractive when compared to its industry's average P/B of 1.79. Over the past year, AEL's P/B has been as high as 1.24 and as low as 0.48, with a median of 0.66.

Finally, investors will want to recognize that AEL has a P/CF ratio of 14.82. 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. AEL's current P/CF looks attractive when compared to its industry's average P/CF of 15.68. Over the past 52 weeks, AEL's P/CF has been as high as 69.99 and as low as 2.36, with a median of 4.61.

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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