Should Value Investors Buy AK Steel (AKS) Stock?
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
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 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.
AK Steel (AKS) is a stock many investors are watching right now. AKS is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 8.72, while its industry has an average P/E of 10.29. AKS's Forward P/E has been as high as 13.90 and as low as 2.80, with a median of 5.50, all within the past year.
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. AKS has a P/S ratio of 0.11. This compares to its industry's average P/S of 0.27.
Finally, investors should note that AKS has a P/CF ratio of 1.78. 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. AKS's current P/CF looks attractive when compared to its industry's average P/CF of 3. Over the past year, AKS's P/CF has been as high as 5.48 and as low as 1.36, with a median of 2.01.
These are just a handful of the figures considered in AK Steel'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 AKS is an impressive value stock right now.
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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.