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Are Investors Undervaluing L Brands (LB) Right Now?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 L Brands (LB). LB is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 10.10 right now. For comparison, its industry sports an average P/E of 13.07. Over the past 52 weeks, LB's Forward P/E has been as high as 14.45 and as low as 8.95, with a median of 11.19.

Investors should also note that LB holds a PEG ratio of 0.92. 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. LB's industry currently sports an average PEG of 1.27. LB's PEG has been as high as 1.26 and as low as 0.81, with a median of 0.99, all within the past year.

Finally, investors will want to recognize that LB has a P/CF ratio of 5.84. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 6.84. LB's P/CF has been as high as 7.76 and as low as 5.05, with a median of 6.14, 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 L Brands is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, LB feels like a great value stock at the moment.


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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.

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