Are Investors Undervaluing Beacon Roofing Supply (BECN) Right Now?
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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 stock to keep an eye on is Beacon Roofing Supply (BECN). BECN is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 13.40, while its industry has an average P/E of 22.21. Over the last 12 months, BECN's Forward P/E has been as high as 17.80 and as low as 4.55, with a median of 11.32.
We also note that BECN holds a PEG ratio of 1.09. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. BECN's industry has an average PEG of 1.77 right now. Within the past year, BECN's PEG has been as high as 1.34 and as low as 0.81, with a median of 1.11.
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. BECN has a P/S ratio of 0.24. This compares to its industry's average P/S of 0.4.
Finally, we should also recognize that BECN has a P/CF ratio of 5.41. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. BECN's current P/CF looks attractive when compared to its industry's average P/CF of 15.41. BECN's P/CF has been as high as 10.36 and as low as 2.85, with a median of 7.97, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Beacon Roofing Supply is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, BECN feels like a great value stock at the moment.
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