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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 Kaiser Aluminum (KALU). KALU is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A.
Another notable valuation metric for KALU is its P/B ratio of 1.61. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2.64. Over the past 12 months, KALU's P/B has been as high as 2.08 and as low as 1.07, with a median of 1.69.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. KALU has a P/S ratio of 0.59. This compares to its industry's average P/S of 1.09.
Finally, investors should note that KALU has a P/CF ratio of 7.29. 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. KALU's P/CF compares to its industry's average P/CF of 8.92. Within the past 12 months, KALU's P/CF has been as high as 8.75 and as low as 4.85, with a median of 7.04.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Kaiser Aluminum is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, KALU feels like a great value stock at the moment.
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Kaiser Aluminum Corporation (KALU): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).