Should Value Investors Buy Kemet (KEM) 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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One stock to keep an eye on is Kemet (KEM). KEM is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock is trading with a P/E ratio of 4.53, which compares to its industry's average of 13.45. Over the past 52 weeks, KEM's Forward P/E has been as high as 15.47 and as low as 4.53, with a median of 9.85.
Another valuation metric that we should highlight is KEM's P/B ratio of 1.87. The P/B is a method of comparing a stock's market value to 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 2.16. Within the past 52 weeks, KEM's P/B has been as high as 3.62 and as low as 1.73, with a median of 2.36.
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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. KEM has a P/S ratio of 0.76. This compares to its industry's average P/S of 1.15.
Finally, investors should note that KEM has a P/CF ratio of 6.88. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. KEM's P/CF compares to its industry's average P/CF of 8.89. KEM's P/CF has been as high as 14.64 and as low as 2.52, with a median of 4.82, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Kemet is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, KEM feels like a great value stock at the moment.