For Immediate Release
Chicago, IL – March 16, 2020 – Stocks in this week’s article are Signet Jewelers Ltd. SIG, Macy's, Inc. M, Citigroup Inc. C, US Foods Holding Corp. USFD and Foundation Building Materials, Inc. FBM.
5 Low P/CF Stocks to Buy Amid Coronavirus-Led Selloff
The rapidly spreading novel coronavirus has rattled the stock market and significantly disrupted economic activities worldwide — denting demand, hurting supply chain, slowing down production activities and temporary closure of brick-and-mortar locations. An edgy stock market was further spooked by Saudi Arabia and Russia’s failure to reach a consensus over output cut, which resulted in the collapse of crude oil prices.
These provided enough ammunition to the bears in the market, which triggered a massive sell-off amid fears of an economic recession. We note that Dow Jones, S&P 500 and the Nasdaq have slid roughly 28.3%, 26.6% and 26%, respectively, in a month’s time.
Nonetheless, every possible measure is being taken to calm investors. The Federal Reserve in a bold move announced to inject up to $1.5 trillion into the financial system to provide cushion to the stock market and prevent unfolding of 2008 financial crisis like situation. Earlier, the Federal Reserve trimmed the benchmark interest rate by 0.5% to the range of 1-1.25%.
Now the big question is what strategy investors should apply. Is it time to get rid of stocks in your portfolio and wait for a conducive investing environment? Or is it time to spot those stocks that are trading cheap but fundamentally sound considering their long-term perspective?
Warren Buffett once said, "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." With the stock market in doldrums, fear is widespread, so its time to be greedy.
Here's an All-Weather Strategy
Value style is considered one of the best practices when it comes to picking stocks. There are different valuation metrics to determine a stock’s inherent strength but a random selection of a ratio cannot serve your purpose if you want a realistic assessment of a company’s financial position. For this, we would suggest Price to Cash Flow (or P/CF) ratio as one of the key metrics.
This metric evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per-share basis – the lower the number, the better. One of the important factors that make P/CF a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly diagnosing the financial health of a company.
It is net cash flow that reveals how much money a company is actually generating and how effectively management is putting the same to use. A positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, shell out for expenses, reinvest in business, endure downturns and finally pay back its shareholders.
However, an investment decision solely based on the P/CF metric may not fetch the desired results. To identify stocks that are trading at a discount, you should expand your search criteria and also consider price-to-book ratio, price-to-earnings ratio and price-to-sales ratio. Adding a favorable Zacks Rank and a Value Score of A or B to your search criteria should lead to even better results as these eliminate the chance of falling into a value trap.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/811396/5-low-pcf-stocks-to-buy-amid-coronavirusled-sell-off
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Citigroup Inc. (C) : Free Stock Analysis Report
Signet Jewelers Limited (SIG) : Free Stock Analysis Report
Macy's, Inc. (M) : Free Stock Analysis Report
US Foods Holding Corp. (USFD) : Free Stock Analysis Report
Foundation Building Materials, Inc. (FBM) : Free Stock Analysis Report
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