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Should Value Investors Buy Ducommun (DCO) Stock?

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·3 min read
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While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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.

Ducommun (DCO) is a stock many investors are watching right now. DCO is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 16.76, which compares to its industry's average of 22.27. Over the past year, DCO's Forward P/E has been as high as 25.07 and as low as 6.41, with a median of 16.58.

Another notable valuation metric for DCO is its P/B ratio of 1.46. 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 solid versus its industry's average P/B of 1.49. Within the past 52 weeks, DCO's P/B has been as high as 2.25 and as low as 0.66, with a median of 1.62.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. DCO has a P/S ratio of 0.65. This compares to its industry's average P/S of 1.3.

Finally, our model also underscores that DCO has a P/CF ratio of 7.71. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 10.05. DCO's P/CF has been as high as 11.79 and as low as 3.24, with a median of 8.18, all within the past year.

These are only a few of the key metrics included in Ducommun'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, DCO looks like an impressive value stock at the moment.


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