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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company value investors might notice is The Gap (GAP). GAP is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock is trading with a P/E ratio of 7.74, which compares to its industry's average of 13.98. Over the past 52 weeks, GAP's Forward P/E has been as high as 20.01 and as low as 7.35, with a median of 11.37.
Investors should also recognize that GAP has a P/B ratio of 2.15. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. GAP's current P/B looks attractive when compared to its industry's average P/B of 4.80. Within the past 52 weeks, GAP's P/B has been as high as 4.02 and as low as 2.04, with a median of 2.89.
Finally, our model also underscores that GAP has a P/CF ratio of 5.30. 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. This stock's P/CF looks attractive against its industry's average P/CF of 11.18. GAP's P/CF has been as high as 9.34 and as low as 5.03, with a median of 6.82, all within the past year.
These are only a few of the key metrics included in The Gap's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, GAP looks like an impressive value stock at the moment.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
