Should Value Investors Buy Diodes (DIOD) Stock?
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.
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 stock to keep an eye on is Diodes (DIOD). DIOD is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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. DIOD has a P/S ratio of 1.52. This compares to its industry's average P/S of 2.11.
Finally, investors will want to recognize that DIOD has a P/CF ratio of 8.93. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. DIOD's current P/CF looks attractive when compared to its industry's average P/CF of 18.50. DIOD's P/CF has been as high as 15.99 and as low as 7.16, with a median of 9.19, all within the past year.
These are only a few of the key metrics included in Diodes's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, DIOD looks like an impressive value stock at the moment.
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