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.
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.
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.
One stock to keep an eye on is TDK (TTDKY). TTDKY is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock holds a P/E ratio of 15.84, while its industry has an average P/E of 18.87. Over the past 52 weeks, TTDKY's Forward P/E has been as high as 92.67 and as low as 11.94, with a median of 16.62.
TTDKY is also sporting a PEG ratio of 1.23. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TTDKY's PEG compares to its industry's average PEG of 1.49. TTDKY's PEG has been as high as 3.58 and as low as 0.51, with a median of 0.74, all within the past year.
We should also highlight that TTDKY has a P/B ratio of 1.73. The P/B ratio is used to compare a stock's market value with 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 2.84. Over the past 12 months, TTDKY's P/B has been as high as 2.32 and as low as 1.31, with a median of 1.92.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. TTDKY has a P/S ratio of 1.52. This compares to its industry's average P/S of 1.53.
Finally, our model also underscores that TTDKY has a P/CF ratio of 8.88. 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. TTDKY's P/CF compares to its industry's average P/CF of 15.59. Within the past 12 months, TTDKY's P/CF has been as high as 11.29 and as low as 6.73, with a median of 9.42.
These figures are just a handful of the metrics value investors tend to look at, but they help show that TDK is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, TTDKY 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.
