Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
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.
One stock to keep an eye on is Central Garden & Pet (CENTA). CENTA is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 11.58, while its industry has an average P/E of 16.61. Over the last 12 months, CENTA's Forward P/E has been as high as 16.39 and as low as 11.42, with a median of 13.11.
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. CENTA has a P/S ratio of 0.66. This compares to its industry's average P/S of 0.69.
Finally, we should also recognize that CENTA has a P/CF ratio of 8.13. 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. CENTA's P/CF compares to its industry's average P/CF of 16.07. Over the past year, CENTA's P/CF has been as high as 11.47 and as low as 7.92, with a median of 9.09.
Value investors will likely look at more than just these metrics, but the above data helps show that Central Garden & Pet is likely undervalued currently. And when considering the strength of its earnings outlook, CENTA sticks out as one of the market's strongest value stocks.
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Central Garden & Pet Company (CENTA): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).