Should Value Investors Buy Old Second Bancorp (OSBC) 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.

One company value investors might notice is Old Second Bancorp (OSBC). OSBC is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.

Another valuation metric that we should highlight is OSBC's P/B ratio of 1.02. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.41. Over the past 12 months, OSBC's P/B has been as high as 1.50 and as low as 0.67, with a median of 0.88.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. OSBC has a P/S ratio of 2.07. This compares to its industry's average P/S of 2.29.

Finally, we should also recognize that OSBC has a P/CF ratio of 8.86. 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. OSBC's current P/CF looks attractive when compared to its industry's average P/CF of 13.36. OSBC's P/CF has been as high as 9.65 and as low as 4.27, with a median of 6.96, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Old Second Bancorp is likely undervalued currently. And when considering the strength of its earnings outlook, OSBC sticks out at as one of the market's strongest value stocks.

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