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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 company to watch right now is Matador Resources (MTDR). MTDR is currently holding a Zacks Rank #1 (Strong Buy) and a Value grade of A. The stock is trading with a P/E ratio of 7.12, which compares to its industry's average of 11.44. Over the past 52 weeks, MTDR's Forward P/E has been as high as 8.71 and as low as 4.41, with a median of 7.10.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. MTDR has a P/S ratio of 1.92. This compares to its industry's average P/S of 2.11.
Value investors will likely look at more than just these metrics, but the above data helps show that Matador Resources is likely undervalued currently. And when considering the strength of its earnings outlook, MTDR sticks out as one of the market's strongest value stocks.
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Matador Resources Company (MTDR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).