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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 PG&E (PCG). PCG is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 9.36 right now. For comparison, its industry sports an average P/E of 14.69. PCG's Forward P/E has been as high as 14.79 and as low as 8.28, with a median of 10.97, all within the past year.
Investors should also note that PCG holds a PEG ratio of 1.05. 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. PCG's industry has an average PEG of 2.07 right now. PCG's PEG has been as high as 1.54 and as low as 0.88, with a median of 1.13, all within the past year.
Another valuation metric that we should highlight is PCG's P/B ratio of 1.34. 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 attractive against its industry's average P/B of 2.48. PCG's P/B has been as high as 2.09 and as low as 1.16, with a median of 1.54, over the past year.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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. PCG has a P/S ratio of 1.41. This compares to its industry's average P/S of 2.42.
Finally, investors will want to recognize that PCG has a P/CF ratio of 4.89. 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. PCG's current P/CF looks attractive when compared to its industry's average P/CF of 10.26. Over the past year, PCG's P/CF has been as high as 6.87 and as low as 4.26, with a median of 5.49.
These figures are just a handful of the metrics value investors tend to look at, but they help show that PG&E is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, PCG feels like a great value stock at the moment.
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Pacific Gas & Electric Co. (PCG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).