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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One stock to keep an eye on is First American Financial (FAF). FAF is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 11.43, which compares to its industry's average of 26.87. Over the past year, FAF's Forward P/E has been as high as 15.32 and as low as 9.75, with a median of 11.61.
Another notable valuation metric for FAF is its P/B ratio of 1.31. 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 attractive against its industry's average P/B of 1.43. Over the past 12 months, FAF's P/B has been as high as 1.43 and as low as 1.08, with a median of 1.29.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. FAF has a P/S ratio of 0.89. This compares to its industry's average P/S of 1.3.
These are just a handful of the figures considered in First American Financial'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 FAF is an impressive value stock right now.
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First American Financial Corporation (FAF): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).