Should Value Investors Buy Patterson Companies (PDCO) 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.
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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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.
Patterson Companies (PDCO) is a stock many investors are watching right now. PDCO is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 13.30, which compares to its industry's average of 18.94. Over the last 12 months, PDCO's Forward P/E has been as high as 13.74 and as low as 10.21, with a median of 11.74.
PDCO is also sporting a PEG ratio of 1.45. 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. PDCO's industry currently sports an average PEG of 1.51. Within the past year, PDCO's PEG has been as high as 1.90 and as low as 1.26, with a median of 1.53.
Another valuation metric that we should highlight is PDCO's P/B ratio of 2.90. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 7.13. PDCO's P/B has been as high as 2.93 and as low as 2.25, with a median of 2.55, over the past year.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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. PDCO has a P/S ratio of 0.49. This compares to its industry's average P/S of 0.88.
Finally, our model also underscores that PDCO has a P/CF ratio of 11.38. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 23.54. Within the past 12 months, PDCO's P/CF has been as high as 11.52 and as low as 8.53, with a median of 9.61.
Value investors will likely look at more than just these metrics, but the above data helps show that Patterson Companies is likely undervalued currently. And when considering the strength of its earnings outlook, PDCO sticks out at as one of the market's strongest value stocks.
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Patterson Companies, Inc. (PDCO) : Free Stock Analysis Report
