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Should Value Investors Buy Kohl's (KSS) Stock?

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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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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.

One company to watch right now is Kohl's (KSS). KSS is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value.

We should also highlight that KSS has a P/B ratio of 1.66. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 2.78. KSS's P/B has been as high as 1.96 and as low as 0.60, with a median of 1.51, over the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. KSS has a P/S ratio of 0.48. This compares to its industry's average P/S of 0.64.

Finally, we should also recognize that KSS has a P/CF ratio of 6.80. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. KSS's current P/CF looks attractive when compared to its industry's average P/CF of 11.01. Over the past 52 weeks, KSS's P/CF has been as high as 13.82 and as low as 3.57, with a median of 6.98.

These are only a few of the key metrics included in Kohl's's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, KSS looks like an impressive value stock at the moment.


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