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.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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 stock to keep an eye on is Piedmont Realty Trust, Inc. (PDM). PDM is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 6.36, while its industry has an average P/E of 16.90. PDM's Forward P/E has been as high as 7.42 and as low as 4.06, with a median of 5.54, all within the past year.
Another notable valuation metric for PDM is its P/B ratio of 0.72. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. PDM's current P/B looks attractive when compared to its industry's average P/B of 1.97. Over the past 12 months, PDM's P/B has been as high as 0.84 and as low as 0.46, with a median of 0.63.
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. PDM has a P/S ratio of 2.12. This compares to its industry's average P/S of 4.04.
Finally, investors should note that PDM has a P/CF ratio of 7.02. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 15.65. Over the past 52 weeks, PDM's P/CF has been as high as 8.83 and as low as 4.29, with a median of 6.18.
Another great REIT and Equity Trust - Other stock you could consider is RLJ Lodging Trust (RLJ), which is a Zacks Rank of #1 (Strong Buy) stock with a Value Score of A.
RLJ Lodging Trust is trading at a forward earnings multiple of 5.31 at the moment, with a PEG ratio of 2.24. This compares to its industry's average P/E of 16.90 and average PEG ratio of 1.50.
Over the last 12 months, RLJ's P/E has been as high as 6.82, as low as 3.87, with a median of 5.41, and its PEG ratio has been as high as 2.54, as low as 0.72, with a median of 1.98.
Additionally, RLJ Lodging Trust has a P/B ratio of 0.62 while its industry's price-to-book ratio sits at 1.97. For RLJ, this valuation metric has been as high as 0.85, as low as 0.51, with a median of 0.67 over the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Piedmont Realty Trust, Inc. and RLJ Lodging Trust are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, PDM and RLJ feels like a great value stock at the moment.
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Piedmont Realty Trust, Inc. (PDM): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).