Are Investors Undervaluing Cosan (CZZ) 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.
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 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 Cosan (CZZ). CZZ is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 13.13, which compares to its industry's average of 17.07. Over the past 52 weeks, CZZ's Forward P/E has been as high as 19.16 and as low as 9.64, with a median of 13.90.
CZZ is also sporting a PEG ratio of 0.80. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CZZ's industry has an average PEG of 1.05 right now. Over the past 52 weeks, CZZ's PEG has been as high as 0.81 and as low as 0.76, with a median of 0.79.
We should also highlight that CZZ has a P/B ratio of 0.98. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.35. Over the past 12 months, CZZ's P/B has been as high as 0.98 and as low as 0.43, with a median of 0.68.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CZZ has a P/S ratio of 0.83. This compares to its industry's average P/S of 0.84.
Finally, investors will want to recognize that CZZ has a P/CF ratio of 4.26. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 6.39. Within the past 12 months, CZZ's P/CF has been as high as 4.26 and as low as 2.43, with a median of 3.28.
These are just a handful of the figures considered in Cosan'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 CZZ is an impressive value stock right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.