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.
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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 company to watch right now is MainStreet Bank (MNSB). MNSB is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value.
Another notable valuation metric for MNSB is its P/B ratio of 0.89. 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 1.21. Within the past 52 weeks, MNSB's P/B has been as high as 0.95 and as low as 0.65, with a median of 0.73.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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. MNSB has a P/S ratio of 1.22. This compares to its industry's average P/S of 2.04.
Investors could also keep in mind Shore Bancshares (SHBI), another Banks - Northeast stock with a Zacks Rank of #2 (Buy) and Value grade of A.
Additionally, Shore Bancshares has a P/B ratio of 1.02 while its industry's price-to-book ratio sits at 1.21. For SHBI, this valuation metric has been as high as 1.09, as low as 0.71, with a median of 0.93 over the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that MainStreet Bank and Shore Bancshares are likely undervalued currently. And when considering the strength of its earnings outlook, MNSB and SHBI sticks out as one of the market's strongest value stocks.
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MainStreet Bank (MNSB): Free Stock Analysis Report
Shore Bancshares Inc (SHBI): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).