The softer-than-expected June Consumer Price Index (CPI) report strengthened expectations that the Federal Reserve could begin easing monetary policy later this year, helping support broader equity markets. However, policymakers have continued to emphasize a data-dependent approach, while ongoing geopolitical tensions and an uneven global economic outlook have kept investors cautious despite improving inflation trends.
At the same time, the powerful rally in several artificial intelligence and high-growth technology stocks has widened valuation gaps across the market. While these companies continue to command premium multiples, many fundamentally sound businesses across traditional sectors remain available at more reasonable valuations despite maintaining stable cash flows and solid long-term earnings prospects. This environment has renewed interest in value investing as investors seek opportunities that can offer downside protection alongside sustainable long-term returns.
This backdrop has created selective opportunities in fundamentally strong but overlooked businesses, making value investing increasingly attractive for investors seeking downside protection alongside sustainable earnings growth. As soon as other investors start selling their stocks at a cheaper rate in times of market uncertainty, value investors take this as an opportunity to pick good stocks at a discounted price.
Several stocks that have surged significantly in the recent past have shown the overwhelming success of this pure-play investment strategy. Here, we discuss four such stocks - Invesco Ltd. IVZ, Aveanna Healthcare AVAH, Companhia Paranaense de Energia ELPC - COPEL and ArcBest ARCB.
However, this apparently simple value investment technique has some drawbacks and not understanding the strategy properly may often lead to “value traps.” In such a situation, these value picks start to underperform over the long run as the temporary problems, which once drove the share price down, turn out to be persistent.
There are many value investment yardsticks, such as dividend yield, P/E or P/B, which are simple and can single out whether a stock is trading at a discount.
However, for investors looking to escape such value traps, it is also vital to determine where the stock would be headed in the next 12 to 24 months. Warren Buffett advises these investors to focus on the earnings growth potential of a stock. This is where lies the importance of a not-so-popular value investing metric, the PEG ratio.
PEG Ratio at a Glance
The PEG ratio is defined as (Price/ Earnings)/Earnings Growth Rate
A low PEG ratio is always better for value investors.
While P/E alone fails to identify a true value stock, PEG helps find the intrinsic value of a stock.
There are some drawbacks to using the PEG ratio. It doesn’t consider the very common situation of changing growth rates, such as the forecast of the first three years at a very high growth rate, followed by a sustainable but lower growth rate over the long term.
Hence, PEG-based investing can turn out to be even more rewarding if some other relevant parameters are also taken into consideration.
Here are some of the screening criteria for a winning strategy:
PEG Ratio less than X Industry Median
P/E Ratio (using F1) less than X Industry Median (for more accurate valuation purposes)
Zacks Rank #1 (Strong Buy) or 2 (Buy) (Whether good market conditions or bad, stocks with a Zacks Rank #1 or 2 have a proven history of success.)
Market Capitalization greater than $1 billion (This helps us to focus on companies that have strong liquidity.)
Average 20-Day Volume greater than 50,000 (A substantial trading volume ensures that the stock is easily tradable.)
Percentage Change F1 Earnings Estimate Revisions (4 Weeks) greater than 5% (Upward estimate revisions add to the optimism, suggesting further bullishness.)
Value Score of less than or equal to B: Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1, 2 or 3 (Hold) offer the best upside potential.
Our PEG-Driven Picks
Here are four stocks that qualified the screening:
Invesco: It is a global independent investment manager offering active, passive and alternative investment strategies across equities, fixed income, ETFs, private markets and multi-asset solutions. Headquartered in Atlanta, GA, the company manages $2.16 trillion in assets (as of March 31, 2026) and serves clients in more than 120 countries.
IVZ currently has a Zacks Rank #2 and a Value Score of A. Invesco also has an impressive five-year expected growth rate of 22%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Aveanna: The company provides a broad range of home-based healthcare services across the United States, serving pediatric and adult patients through its Private Duty Services, Home Health & Hospice, and Medical Solutions businesses. Its offerings include skilled nursing, therapy and personal care designed to improve patient outcomes while reducing institutional care.
AVAH currently has a Zacks Rank #2 and a Value Score of A. Aveanna also has an impressive five-year expected growth rate of 14.9%.
COPEL: This is a leading Brazilian electric utility engaged in electricity generation, transmission, distribution and energy commercialization. COPEL primarily generates power from hydroelectric and wind sources while also constructing, operating and maintaining transmission lines and substations to serve customers across Brazil.
Apart from a discounted PEG and P/E, ELPC currently has a Zacks Rank #2 and a Value Score of B. COPEL has a long-term expected growth rate of 16%.
ArcBest: This is an integrated logistics company providing less-than-truckload transportation through ABF Freight and a broad portfolio of asset-light services, including truckload brokerage, managed transportation, intermodal, warehousing and international shipping. Headquartered in Fort Smith, AR, the company serves diverse industries through its Asset-Based and Asset-Light operating segments.
ARCB has a Zacks Rank #1 and a Value Score of B. ArcBest also has an impressive five-year expected growth rate of 37.7%.
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Invesco Ltd. (IVZ): Free Stock Analysis Report
ArcBest Corporation (ARCB): Free Stock Analysis Report
Aveanna Healthcare Holdings Inc. (AVAH): Free Stock Analysis Report
Companhia Paranaense de Energia - Copel Unsponsored ADR (ELPC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).