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.
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 use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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 value investors might notice is Sensata Technologies Holding (ST). ST is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 8.88. This compares to its industry's average Forward P/E of 15.67. Over the last 12 months, ST's Forward P/E has been as high as 10.14 and as low as 5.38, with a median of 8.77.
We also note that ST holds a PEG ratio of 1.16. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ST's industry currently sports an average PEG of 1.60. ST's PEG has been as high as 1.37 and as low as 0.72, with a median of 1.13, all within the past year.
Another notable valuation metric for ST is its P/B ratio of 1.58. 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 stock's P/B looks solid versus its industry's average P/B of 3.12. Over the past 12 months, ST's P/B has been as high as 1.85 and as low as 0.91, with a median of 1.50.
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. ST has a P/S ratio of 1.71. This compares to its industry's average P/S of 2.59.
Finally, investors will want to recognize that ST has a P/CF ratio of 8.32. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 16.99. Within the past 12 months, ST's P/CF has been as high as 8.92 and as low as 4.54, with a median of 7.12.
Value investors will likely look at more than just these metrics, but the above data helps show that Sensata Technologies Holding is likely undervalued currently. And when considering the strength of its earnings outlook, ST sticks out as one of the market's strongest value stocks.
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Sensata Technologies Holding N.V. (ST): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).