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Should Value Investors Buy HollyFrontier (HFC) Stock?

Zacks Equity Research

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.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of 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.

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.

HollyFrontier (HFC) is a stock many investors are watching right now. HFC is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 9.66. This compares to its industry's average Forward P/E of 9.74. Over the past 52 weeks, HFC's Forward P/E has been as high as 11.22 and as low as 6.45, with a median of 9.14.

Investors should also note that HFC holds a PEG ratio of 0.94. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. HFC's industry currently sports an average PEG of 0.96. Within the past year, HFC's PEG has been as high as 1.10 and as low as 0.66, with a median of 0.93.

Finally, we should also recognize that HFC has a P/CF ratio of 5.57. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. HFC's P/CF compares to its industry's average P/CF of 6.76. Over the past year, HFC's P/CF has been as high as 6.57 and as low as 4.26, with a median of 5.59.

These figures are just a handful of the metrics value investors tend to look at, but they help show that HollyFrontier is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, HFC feels like a great value stock at the moment.

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Zacks Investment Research