Should Value Investors Buy Rent-A-Center (RCII) 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.
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.
One stock to keep an eye on is Rent-A-Center (RCII). RCII is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 10.36 right now. For comparison, its industry sports an average P/E of 15.66. RCII's Forward P/E has been as high as 18.02 and as low as 9.32, with a median of 11.21, all within the past year.
Investors should also recognize that RCII has a P/B ratio of 3.56. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. RCII's current P/B looks attractive when compared to its industry's average P/B of 7.88. RCII's P/B has been as high as 4.89 and as low as 2.46, with a median of 3.51, over the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. RCII has a P/S ratio of 0.52. This compares to its industry's average P/S of 0.89.
These are just a handful of the figures considered in Rent-A-Center'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 RCII is an impressive value stock right now.
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