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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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.
ADT (ADT) is a stock many investors are watching right now. ADT 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 9.49 right now. For comparison, its industry sports an average P/E of 13.14. Over the past year, ADT's Forward P/E has been as high as 10.52 and as low as 8.31, with a median of 9.41.
Investors should also recognize that ADT has a P/B ratio of 1.95. 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 4.25. ADT's P/B has been as high as 2.01 and as low as 1.56, with a median of 1.82, 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 preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ADT has a P/S ratio of 1.15. This compares to its industry's average P/S of 2.08.
Finally, our model also underscores that ADT has a P/CF ratio of 3.87. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. ADT's current P/CF looks attractive when compared to its industry's average P/CF of 11.52. ADT's P/CF has been as high as 4.21 and as low as 2.88, with a median of 3.83, all within the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that ADT is likely undervalued currently. And when considering the strength of its earnings outlook, ADT sticks out as one of the market's strongest value stocks.
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ADT Inc. (ADT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).