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.
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 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.
Avnet (AVT) is a stock many investors are watching right now. AVT is currently sporting a Zacks Rank #1 (Strong Buy) and an A for Value. The stock holds a P/E ratio of 10.47, while its industry has an average P/E of 12.53. AVT's Forward P/E has been as high as 16.75 and as low as 8.05, with a median of 10.50, all within the past year.
We also note that AVT holds a PEG ratio of 0.36. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AVT's PEG compares to its industry's average PEG of 0.49. AVT's PEG has been as high as 1.89 and as low as 0.35, with a median of 0.81, all within the past year.
Another notable valuation metric for AVT is its P/B ratio of 0.89. 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. AVT's current P/B looks attractive when compared to its industry's average P/B of 2.12. Over the past 12 months, AVT's P/B has been as high as 1.00 and as low as 0.71, with a median of 0.91.
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. AVT has a P/S ratio of 0.27. This compares to its industry's average P/S of 0.5.
Finally, investors will want to recognize that AVT has a P/CF ratio of 12.36. 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 16.72. Over the past year, AVT's P/CF has been as high as 13.11 and as low as 7.28, with a median of 9.98.
These are only a few of the key metrics included in Avnet'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, AVT looks like an impressive value stock at the moment.
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Avnet, Inc. (AVT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).