The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. 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.
Dollar General (DG) is a stock many investors are watching right now. DG is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 15.89, which compares to its industry's average of 28.25. Over the past 52 weeks, DG's Forward P/E has been as high as 19.69 and as low as 11.46, with a median of 13.98.
DG is also sporting a PEG ratio of 2.05. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DG's industry currently sports an average PEG of 2.68. Within the past year, DG's PEG has been as high as 2.91 and as low as 1.96, with a median of 2.29.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. DG has a P/S ratio of 0.66. This compares to its industry's average P/S of 1.28.
Finally, investors will want to recognize that DG has a P/CF ratio of 10.24. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 28.62. DG's P/CF has been as high as 11.93 and as low as 6.61, with a median of 8.66, all within the past year.
These are just a handful of the figures considered in Dollar General's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that DG is an impressive value stock right now.
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Dollar General Corporation (DG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).