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.
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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
Mercury General (MCY) is a stock many investors are watching right now. MCY 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 12.08 right now. For comparison, its industry sports an average P/E of 26.29. Over the past year, MCY's Forward P/E has been as high as 163.64 and as low as 6.83, with a median of 13.27.
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. MCY has a P/S ratio of 0.92. This compares to its industry's average P/S of 1.17.
Finally, investors will want to recognize that MCY has a P/CF ratio of 9.50. 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. MCY's current P/CF looks attractive when compared to its industry's average P/CF of 11.15. MCY's P/CF has been as high as 10.18 and as low as 4.83, with a median of 7.64, all within the past year.
These are only a few of the key metrics included in Mercury General'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, MCY looks like an impressive value stock at the moment.
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Mercury General Corporation (MCY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).