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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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.
Precision Drilling (PDS) is a stock many investors are watching right now. PDS is currently holding a Zacks Rank #1 (Strong Buy) and a Value grade of A.
Another valuation metric that we should highlight is PDS's P/B ratio of 0.63. 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. PDS's current P/B looks attractive when compared to its industry's average P/B of 0.96. PDS's P/B has been as high as 0.80 and as low as 0.43, with a median of 0.62, over the past year.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. PDS has a P/S ratio of 0.57. This compares to its industry's average P/S of 0.77.
Value investors will likely look at more than just these metrics, but the above data helps show that Precision Drilling is likely undervalued currently. And when considering the strength of its earnings outlook, PDS sticks out as one of the market's strongest value stocks.
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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.
