Are Investors Undervaluing Arlington Asset Investment (AI) Right Now?
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.
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 to watch right now is Arlington Asset Investment (AI). AI is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.
We should also highlight that AI has a P/B ratio of 0.56. 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 stock's P/B looks solid versus its industry's average P/B of 0.93. AI's P/B has been as high as 0.85 and as low as 0.22, with a median of 0.71, over the past year.
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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. AI has a P/S ratio of 1.22. This compares to its industry's average P/S of 2.02.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Arlington Asset Investment is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AI feels like a great value stock at the moment.
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