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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company value investors might notice is DaVita (DVA). DVA is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 10.65, while its industry has an average P/E of 16.95. DVA's Forward P/E has been as high as 15.44 and as low as 10.48, with a median of 13.17, all within the past year.
Investors will also notice that DVA has a PEG ratio of 0.83. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DVA's industry currently sports an average PEG of 1.59. DVA's PEG has been as high as 1.09 and as low as 0.69, with a median of 0.87, all within the past year.
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. DVA has a P/S ratio of 0.92. This compares to its industry's average P/S of 1.19.
These are just a handful of the figures considered in DaVita'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 DVA is an impressive value stock right now.
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DaVita Inc. (DVA): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).