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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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 Subsea 7 (SUBCY). SUBCY is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 12 right now. For comparison, its industry sports an average P/E of 18.16. Over the past year, SUBCY's Forward P/E has been as high as 18.75 and as low as 10.18, with a median of 12.10.
Another valuation metric that we should highlight is SUBCY's P/B ratio of 1.39. 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 stock's P/B looks attractive against its industry's average P/B of 2.17. Over the past 12 months, SUBCY's P/B has been as high as 1.45 and as low as 0.89, with a median of 1.15.
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. SUBCY has a P/S ratio of 0.84. This compares to its industry's average P/S of 0.85.
Finally, our model also underscores that SUBCY has a P/CF ratio of 7.21. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. SUBCY's P/CF compares to its industry's average P/CF of 8.90. Over the past 52 weeks, SUBCY's P/CF has been as high as 8.18 and as low as 5.09, with a median of 6.50.
These are only a few of the key metrics included in Subsea 7's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, SUBCY looks like an impressive 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.
