Is Reliance Steel (RS) Stock Undervalued 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.
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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 company value investors might notice is Reliance Steel (RS). RS 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 16.09 right now. For comparison, its industry sports an average P/E of 35.18. RS's Forward P/E has been as high as 17.40 and as low as 9, with a median of 13.26, all within the past year.
We also note that RS holds a PEG ratio of 1.79. 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. RS's PEG compares to its industry's average PEG of 3.50. Over the past 52 weeks, RS's PEG has been as high as 1.93 and as low as 1, with a median of 1.47.
Finally, our model also underscores that RS has a P/CF ratio of 8.16. 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 company's current P/CF looks solid when compared to its industry's average P/CF of 10.31. Over the past 52 weeks, RS's P/CF has been as high as 9.80 and as low as 5.26, with a median of 8.11.
These are only a few of the key metrics included in Reliance Steel'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, RS looks like an impressive 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.