Should Value Investors Buy These Finance Stocks?
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.
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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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.
One stock to keep an eye on is Limestone Bancorp (LMST). LMST is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 11.82. This compares to its industry's average Forward P/E of 12.55. LMST's Forward P/E has been as high as 15.09 and as low as 9.70, with a median of 11.97, all within the past year.
Investors should also recognize that LMST has a P/B ratio of 0.98. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. LMST's current P/B looks attractive when compared to its industry's average P/B of 1.89. Over the past year, LMST's P/B has been as high as 1.02 and as low as 0.81, with a median of 0.92.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. LMST has a P/S ratio of 2.16. This compares to its industry's average P/S of 2.98.
Finally, our model also underscores that LMST has a P/CF ratio of 6.94. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 18.29. LMST's P/CF has been as high as 9.62 and as low as 6.52, with a median of 7.37, all within the past year.
Investors could also keep in mind Midland States Bancorp (MSBI), an Banks - Northeast stock with a Zacks Rank of # 1 (Strong Buy) and Value grade of A.
Midland States Bancorp also has a P/B ratio of 0.99 compared to its industry's price-to-book ratio of 1.89. Over the past year, its P/B ratio has been as high as 1.06, as low as 0.77, with a median of 0.88.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Limestone Bancorp and Midland States Bancorp are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, LMST and MSBI feels like a great value stock at the moment.
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LIMESTONE BANCORP, INC. (LMST) : Free Stock Analysis Report
Midland States Bancorp, Inc. (MSBI) : Free Stock Analysis Report
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