While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
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 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 stock to keep an eye on is Encompass Health (EHC). EHC is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A.
Investors should also recognize that EHC has a P/B ratio of 4.12. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 4.69. EHC's P/B has been as high as 4.27 and as low as 3.28, with a median of 3.72, over the past year.
Finally, investors should note that EHC has a P/CF ratio of 14.97. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. EHC's current P/CF looks attractive when compared to its industry's average P/CF of 33.03. Over the past 52 weeks, EHC's P/CF has been as high as 15.35 and as low as 12.07, with a median of 13.73.
These are only a few of the key metrics included in Encompass Health's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, EHC looks like an impressive value stock at the moment.
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Encompass Health Corporation (EHC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).