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Should Value Investors Buy Cleveland-Cliffs (CLF) Stock?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

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.

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.

One company to watch right now is Cleveland-Cliffs (CLF). CLF is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 5.54, while its industry has an average P/E of 7.70. Over the past 52 weeks, CLF's Forward P/E has been as high as 8.23 and as low as 3.26, with a median of 6.40.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CLF has a P/S ratio of 0.94. This compares to its industry's average P/S of 1.15.

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


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