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.
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 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.
Harmony Biosciences (HRMY) is a stock many investors are watching right now. HRMY is currently sporting a Zacks Rank #1 (Strong Buy), as well as an A grade for Value.
Another valuation metric that we should highlight is HRMY's P/B ratio of 2.42. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. HRMY's current P/B looks attractive when compared to its industry's average P/B of 3.99. Within the past 52 weeks, HRMY's P/B has been as high as 4.20 and as low as 2.23, with a median of 2.87.
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. HRMY has a P/S ratio of 2.32. This compares to its industry's average P/S of 5.94.
Finally, we should also recognize that HRMY has a P/CF ratio of 9.34. 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. This stock's P/CF looks attractive against its industry's average P/CF of 11.64. Over the past 52 weeks, HRMY's P/CF has been as high as 16.61 and as low as 9.07, with a median of 11.73.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Harmony Biosciences is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, HRMY feels like a great value stock at the moment.
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Harmony Biosciences Holdings, Inc. (HRMY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).