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.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company to watch right now is Arcos Dorados (ARCO). ARCO is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 9.83. This compares to its industry's average Forward P/E of 21.06. Over the last 12 months, ARCO's Forward P/E has been as high as 12.33 and as low as 9.14, with a median of 10.31.
Investors will also notice that ARCO has a PEG ratio of 1.14. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ARCO's PEG compares to its industry's average PEG of 1.37. Over the past 52 weeks, ARCO's PEG has been as high as 3.55 and as low as 1.14, with a median of 2.21.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. ARCO has a P/S ratio of 0.29. This compares to its industry's average P/S of 0.76.
Value investors will likely look at more than just these metrics, but the above data helps show that Arcos Dorados is likely undervalued currently. And when considering the strength of its earnings outlook, ARCO sticks out as one of the market's strongest value stocks.
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Arcos Dorados Holdings Inc. (ARCO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).