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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company to watch right now is XP (XP). XP is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 10.43, while its industry has an average P/E of 11.44. Over the last 12 months, XP's Forward P/E has been as high as 12.34 and as low as 1.97, with a median of 9.21.
Another notable valuation metric for XP is its P/B ratio of 2.7. 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. XP's current P/B looks attractive when compared to its industry's average P/B of 2.86. XP's P/B has been as high as 3.08 and as low as 1.60, with a median of 2.34, over the past year.
Finally, investors will want to recognize that XP has a P/CF ratio of 11.68. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 14.51. XP's P/CF has been as high as 12.54 and as low as 6.71, with a median of 9.85, 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 XP is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, XP feels like a great value stock at the moment.
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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.
