Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
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.
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 company value investors might notice is Nice (NICE). NICE is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 11.58, which compares to its industry's average of 26.31. NICE's Forward P/E has been as high as 16.60 and as low as 9.78, with a median of 13.07, all within the past year.
Investors should also recognize that NICE has a P/B ratio of 2.6. The P/B ratio pits a stock's market value against 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 4.54. Within the past 52 weeks, NICE's P/B has been as high as 3.50 and as low as 2.17, with a median of 2.91.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by 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. NICE has a P/S ratio of 1.88. This compares to its industry's average P/S of 3.05.
Finally, investors will want to recognize that NICE has a P/CF ratio of 13.51. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 14.84. NICE's P/CF has been as high as 20.88 and as low as 11.26, with a median of 16.30, all within the past year.
StoneCo (STNE) may be another strong Internet - Software stock to add to your shortlist. STNE is a Zacks Rank of #2 (Buy) stock with a Value grade of A.
Shares of StoneCo are currently trading at a forward earnings multiple of 11.19 and a PEG ratio of 0.37 compared to its industry's P/E and PEG ratios of 26.31 and 0.93, respectively.
Over the last 12 months, STNE's P/E has been as high as 11.19, as low as 6.09, with a median of 8.65, and its PEG ratio has been as high as 0.45, as low as 0.28, with a median of 0.35.
Additionally, StoneCo has a P/B ratio of 2.71 while its industry's price-to-book ratio sits at 4.54. For STNE, this valuation metric has been as high as 2.71, as low as 0.88, with a median of 1.45 over the past year.
These are just a handful of the figures considered in Nice and StoneCo's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that NICE and STNE is an impressive value stock right now.
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This article originally published on Zacks Investment Research (zacks.com).