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.
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.
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.
One stock to keep an eye on is Healthcare Services Group (HCSG). HCSG is currently sporting a Zacks Rank #1 (Strong Buy), as well as a Value grade of A.
Investors should also recognize that HCSG has a P/B ratio of 2.4. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. HCSG's current P/B looks attractive when compared to its industry's average P/B of 2.64. HCSG's P/B has been as high as 2.51 and as low as 1.33, with a median of 1.77, over the past year.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by 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. HCSG has a P/S ratio of 0.76. This compares to its industry's average P/S of 1.2.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Healthcare Services Group is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, HCSG feels like a great value stock at the moment.
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Healthcare Services Group, Inc. (HCSG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).