Should Value Investors Buy Kemet (KEM) Stock?
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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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.
Kemet (KEM) is a stock many investors are watching right now. KEM is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock is trading with P/E ratio of 8.23 right now. For comparison, its industry sports an average P/E of 15.73. Over the past year, KEM's Forward P/E has been as high as 15.47 and as low as 6.03, with a median of 10.01.
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. KEM has a P/S ratio of 0.97. This compares to its industry's average P/S of 1.25.
Finally, investors will want to recognize that KEM has a P/CF ratio of 9.11. 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. KEM's P/CF compares to its industry's average P/CF of 12.67. Within the past 12 months, KEM's P/CF has been as high as 14.66 and as low as 2.41, with a median of 3.62.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Kemet is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, KEM feels like a great value stock at the moment.
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