While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
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.
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 stock to keep an eye on is Mayville Engineering (MEC). MEC is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 13.31. This compares to its industry's average Forward P/E of 19.17. Over the past year, MEC's Forward P/E has been as high as 49.70 and as low as 11.16, with a median of 19.39.
Another valuation metric that we should highlight is MEC's P/B ratio of 1.24. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 3.49. Over the past 12 months, MEC's P/B has been as high as 1.89 and as low as 0.97, with a median of 1.41.
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. MEC has a P/S ratio of 0.56. This compares to its industry's average P/S of 1.37.
Finally, investors should note that MEC has a P/CF ratio of 5.20. 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. MEC's current P/CF looks attractive when compared to its industry's average P/CF of 14.45. Over the past 52 weeks, MEC's P/CF has been as high as 9.30 and as low as 4.06, with a median of 7.12.
These are just a handful of the figures considered in Mayville Engineering's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that MEC is an impressive value stock right now.
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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.
