Should Value Investors Buy Healthcare Services Group (HCSG) Stock?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 stock to keep an eye on is Healthcare Services Group (HCSG). HCSG is currently holding a Zacks Rank #1 (Strong Buy) and a Value grade of A.

Another valuation metric that we should highlight is HCSG's P/B ratio of 2.4. 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 company's current P/B looks solid when compared to its industry's average P/B of 2.72. Over the past year, HCSG's P/B has been as high as 2.51 and as low as 1.33, with a median of 1.77.

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. HCSG has a P/S ratio of 0.86. This compares to its industry's average P/S of 1.13.

These are only a few of the key metrics included in Healthcare Services Group'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, HCSG looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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