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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 Cars.com (CARS). CARS is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value.
Investors should also recognize that CARS has a 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. CARS's current P/B looks attractive when compared to its industry's average P/B of 4.23. 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 use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. CARS has a P/S ratio of 0.88. This compares to its industry's average P/S of 1.13.
Finally, we should also recognize that CARS has a P/CF ratio of 5.80. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 13.21. 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 just a handful of the figures considered in Cars.com's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that CARS is an impressive value stock right now.
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Cars.com Inc. (CARS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).