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.
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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
Cars.com (CARS) is a stock many investors are watching right now. CARS is currently sporting a Zacks Rank #1 (Strong Buy), as well as a Value grade of A.
Another notable valuation metric for CARS is its P/B ratio of 1.76. 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. This company's current P/B looks solid when compared to its industry's average P/B of 4.10. Within the past 52 weeks, CARS's P/B has been as high as 2.64 and as low as 1.30, with a median of 1.74.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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. CARS has a P/S ratio of 0.76. This compares to its industry's average P/S of 0.99.
Finally, our model also underscores that CARS has a P/CF ratio of 5.80. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. CARS's current P/CF looks attractive when compared to its industry's average P/CF of 12.84. Over the past year, CARS's P/CF has been as high as 9.20 and as low as 4.20, with a median of 5.76.
These are only a few of the key metrics included in Cars.com'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, CARS looks like an impressive value stock at the moment.
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Cars.com Inc. (CARS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).