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Should Value Investors Buy Exfo (EXFO) Stock?

Zacks Equity Research

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.

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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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.

Exfo (EXFO) is a stock many investors are watching right now. EXFO is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 23.05, which compares to its industry's average of 24.81. Over the last 12 months, EXFO's Forward P/E has been as high as 25.74 and as low as 11.11, with a median of 15.76.

Another valuation metric that we should highlight is EXFO's P/B ratio of 1.50. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 3.13. EXFO's P/B has been as high as 1.50 and as low as 0.85, with a median of 1.09, over the past year.

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. EXFO has a P/S ratio of 0.89. This compares to its industry's average P/S of 1.28.

Value investors will likely look at more than just these metrics, but the above data helps show that Exfo is likely undervalued currently. And when considering the strength of its earnings outlook, EXFO sticks out at as one of the market's strongest value stocks.


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