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Should Value Investors Buy United Continental (UAL) Stock?

Zacks Equity Research

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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

United Continental (UAL) is a stock many investors are watching right now. UAL is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 8. This compares to its industry's average Forward P/E of 9.36. Over the last 12 months, UAL's Forward P/E has been as high as 9.80 and as low as 6.72, with a median of 7.90.

Investors should also note that UAL holds a PEG ratio of 0.36. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. UAL's PEG compares to its industry's average PEG of 0.40. UAL's PEG has been as high as 0.47 and as low as 0.32, with a median of 0.39, all within the past year.

Investors should also recognize that UAL has a P/B ratio of 2.37. The P/B ratio is used to compare a stock's market value with 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 2.99. Over the past 12 months, UAL's P/B has been as high as 2.85 and as low as 2.08, with a median of 2.38.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. UAL has a P/S ratio of 0.57. This compares to its industry's average P/S of 0.69.

Finally, our model also underscores that UAL has a P/CF ratio of 5.10. 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. This stock's P/CF looks attractive against its industry's average P/CF of 6.65. UAL's P/CF has been as high as 6.02 and as low as 4.62, with a median of 5.26, all within the past year.

These are just a handful of the figures considered in United Continental's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that UAL is an impressive value stock right now.


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