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Should Value Investors Buy China Distance (DL) 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.

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 use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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.

China Distance (DL) is a stock many investors are watching right now. DL is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 8.23, while its industry has an average P/E of 23.70. Over the last 12 months, DL's Forward P/E has been as high as 9.24 and as low as 8.09, with a median of 8.54.

We also note that DL holds a PEG ratio of 0.55. 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. DL's PEG compares to its industry's average PEG of 0.80. Over the last 12 months, DL's PEG has been as high as 0.62 and as low as 0.54, with a median of 0.57.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. DL has a P/S ratio of 0.93. This compares to its industry's average P/S of 1.32.

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

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