Should Value Investors Buy GMS Inc. (GMS) Stock?
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.
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.
GMS Inc. (GMS) is a stock many investors are watching right now. GMS is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 7.35, while its industry has an average P/E of 19.09. GMS's Forward P/E has been as high as 7.74 and as low as 4.05, with a median of 5.66, all within the past year.
GMS is also sporting a PEG ratio of 1.05. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. GMS's industry currently sports an average PEG of 1.44. Within the past year, GMS's PEG has been as high as 1.11 and as low as 0.58, with a median of 0.81.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. GMS has a P/S ratio of 0.3. This compares to its industry's average P/S of 0.43.
Finally, our model also underscores that GMS has a P/CF ratio of 5.41. 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. GMS's P/CF compares to its industry's average P/CF of 13.68. Over the past year, GMS's P/CF has been as high as 8.39 and as low as 3.75, with a median of 4.85.
These figures are just a handful of the metrics value investors tend to look at, but they help show that GMS Inc. Is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, GMS feels like a great value stock at the moment.
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