Are Investors Undervaluing Rent-A-Center (RCII) 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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One stock to keep an eye on is Rent-A-Center (RCII). RCII is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock holds a P/E ratio of 10.87, while its industry has an average P/E of 15.55. Over the past year, RCII's Forward P/E has been as high as 36.83 and as low as 9.32, with a median of 12.48.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. RCII has a P/S ratio of 0.5. This compares to its industry's average P/S of 0.75.
Finally, investors will want to recognize that RCII has a P/CF ratio of 1.87. 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. RCII's current P/CF looks attractive when compared to its industry's average P/CF of 6.62. RCII's P/CF has been as high as 2.02 and as low as 0.74, with a median of 1.14, all within the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that Rent-A-Center is likely undervalued currently. And when considering the strength of its earnings outlook, RCII sticks out at as one of the market's strongest value stocks.
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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.