Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore 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 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 company value investors might notice is RLJ Lodging Trust (RLJ). RLJ is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 5.31 right now. For comparison, its industry sports an average P/E of 14.91. RLJ's Forward P/E has been as high as 6.82 and as low as 3.87, with a median of 5.41, all within the past year.
Another notable valuation metric for RLJ is its P/B ratio of 0.62. 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. RLJ's current P/B looks attractive when compared to its industry's average P/B of 1.79. RLJ's P/B has been as high as 0.85 and as low as 0.51, with a median of 0.67, 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. RLJ has a P/S ratio of 1.24. This compares to its industry's average P/S of 3.62.
These figures are just a handful of the metrics value investors tend to look at, but they help show that RLJ Lodging Trust is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, RLJ feels like a great value stock at the moment.
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RLJ Lodging Trust (RLJ): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).