Is Vipshop Holdings Limited (VIPS) 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.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. 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 stock to keep an eye on is Vipshop Holdings Limited (VIPS). VIPS is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value.
We should also highlight that VIPS has a P/B ratio of 1.74. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 4.33. Over the past year, VIPS's P/B has been as high as 2.22 and as low as 1.24, with a median of 1.84.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. VIPS has a P/S ratio of 0.43. This compares to its industry's average P/S of 0.88.
Finally, we should also recognize that VIPS has a P/CF ratio of 10.35. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. VIPS's P/CF compares to its industry's average P/CF of 26.59. VIPS's P/CF has been as high as 13.17 and as low as 5.97, with a median of 10.65, all within the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that Vipshop Holdings Limited is likely undervalued currently. And when considering the strength of its earnings outlook, VIPS sticks out at as one of the market's strongest value stocks.
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