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.
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.
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 company to watch right now is DiamondRock Hospitality (DRH). DRH is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 7.89, while its industry has an average P/E of 16.19. DRH's Forward P/E has been as high as 9.58 and as low as 6.25, with a median of 8.00, all within the past year.
Another valuation metric that we should highlight is DRH's P/B ratio of 1.08. 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. This stock's P/B looks solid versus its industry's average P/B of 1.92. DRH's P/B has been as high as 1.22 and as low as 0.85, with a median of 1.08, 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. DRH has a P/S ratio of 2.21. This compares to its industry's average P/S of 3.83.
Finally, investors will want to recognize that DRH has a P/CF ratio of 9.43. 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. This stock's P/CF looks attractive against its industry's average P/CF of 15.01. Within the past 12 months, DRH's P/CF has been as high as 11.57 and as low as 8.09, with a median of 9.95.
These are only a few of the key metrics included in DiamondRock Hospitality'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, DRH looks like an impressive value stock at the moment.
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DiamondRock Hospitality Company (DRH): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).