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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 use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
GMS (GMS) is a stock many investors are watching right now. GMS is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 8.88, while its industry has an average P/E of 21.40. Over the past 52 weeks, GMS's Forward P/E has been as high as 11.12 and as low as 3.22, with a median of 8.37.
We also note that GMS holds a PEG ratio of 0.63. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. GMS's industry has an average PEG of 1.70 right now. Over the past 52 weeks, GMS's PEG has been as high as 1.26 and as low as 0.46, with a median of 1.18.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. GMS has a P/S ratio of 0.38. This compares to its industry's average P/S of 0.74.
Finally, our model also underscores that GMS has a P/CF ratio of 8.40. 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. GMS's P/CF compares to its industry's average P/CF of 15.41. Over the past year, GMS's P/CF has been as high as 10.36 and as low as 2.27, with a median of 6.40.
These figures are just a handful of the metrics value investors tend to look at, but they help show that GMS is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, GMS feels like a great value stock at the moment.
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