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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 company to watch right now is VAREX IMAGING (VREX). VREX is currently sporting a Zacks Rank #1 (Strong Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 12.78 right now. For comparison, its industry sports an average P/E of 16.79. VREX's Forward P/E has been as high as 26.48 and as low as 11.49, with a median of 18.40, all within the past year.
Another notable valuation metric for VREX is its P/B ratio of 1.08. 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 2.45. Over the past year, VREX's P/B has been as high as 1.24 and as low as 0.50, with a median of 0.94.
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 preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. VREX has a P/S ratio of 0.54. This compares to its industry's average P/S of 1.45.
These are only a few of the key metrics included in VAREX IMAGING'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, VREX looks like an impressive value stock at the moment.
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This article originally published on Zacks Investment Research (zacks.com).