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.
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 stock to keep an eye on is Shift4 Payments (FOUR). FOUR is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 13.81, which compares to its industry's average of 17.08. Over the past year, FOUR's Forward P/E has been as high as 29.16 and as low as 13.28, with a median of 17.86.
FOUR is also sporting a PEG ratio of 0.62. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. FOUR's PEG compares to its industry's average PEG of 1.00. Over the past 52 weeks, FOUR's PEG has been as high as 1.11 and as low as 0.47, with a median of 0.66.
We should also highlight that FOUR has a P/B ratio of 7.56. 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. This company's current P/B looks solid when compared to its industry's average P/B of 8.07. Over the past 12 months, FOUR's P/B has been as high as 11.00 and as low as 6.32, with a median of 8.04.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. FOUR has a P/S ratio of 0.89. This compares to its industry's average P/S of 1.86.
Finally, our model also underscores that FOUR has a P/CF ratio of 13.43. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. FOUR's current P/CF looks attractive when compared to its industry's average P/CF of 13.43. Over the past year, FOUR's P/CF has been as high as 23.91 and as low as 11.91, with a median of 15.91.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Shift4 Payments is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, FOUR feels like a great value stock at the moment.
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Shift4 Payments, Inc. (FOUR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).