Is Rent-A-Center (RCII) Stock Undervalued Right Now?
The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find 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.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
Rent-A-Center (RCII) is a stock many investors are watching right now. RCII is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 11.49 right now. For comparison, its industry sports an average P/E of 15.89. Over the past year, RCII's Forward P/E has been as high as 36.07 and as low as 9.32, with a median of 12.25.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. RCII has a P/S ratio of 0.52. This compares to its industry's average P/S of 0.81.
Finally, investors will want to recognize that RCII has a P/CF ratio of 2. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. RCII's P/CF compares to its industry's average P/CF of 6.34. Over the past 52 weeks, RCII's P/CF has been as high as 2.02 and as low as 0.94, with a median of 1.15.
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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