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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
One stock to keep an eye on is Mercury General (MCY). MCY is currently sporting a Zacks Rank #1 (Strong Buy) and an A for Value. The stock is trading with a P/E ratio of 12.08, which compares to its industry's average of 25.50. Over the last 12 months, MCY's Forward P/E has been as high as 163.64 and as low as 6.83, with a median of 13.27.
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. MCY has a P/S ratio of 0.88. This compares to its industry's average P/S of 1.15.
Finally, investors will want to recognize that MCY has a P/CF ratio of 9.50. 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. MCY's current P/CF looks attractive when compared to its industry's average P/CF of 10.79. MCY's P/CF has been as high as 10.18 and as low as 4.83, with a median of 7.64, all within the past year.
These are only a few of the key metrics included in Mercury General'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, MCY looks like an impressive value stock at the moment.
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Mercury General Corporation (MCY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).