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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company to watch right now is Central Garden & Pet (CENTA). CENTA is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 11.58. This compares to its industry's average Forward P/E of 15.70. Over the last 12 months, CENTA's Forward P/E has been as high as 16.39 and as low as 11.42, with a median of 13.11.
Investors should also recognize that CENTA has a P/B ratio of 1.24. 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. CENTA's current P/B looks attractive when compared to its industry's average P/B of 2.64. Over the past 12 months, CENTA's P/B has been as high as 1.58 and as low as 1.20, with a median of 1.35.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. CENTA has a P/S ratio of 0.65. This compares to its industry's average P/S of 0.67.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Central Garden & Pet is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CENTA feels like a great value stock at the moment.
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Central Garden & Pet Company (CENTA): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).