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 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 Encore Capital Group (ECPG). ECPG is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 5.46, which compares to its industry's average of 8.02. Over the last 12 months, ECPG's Forward P/E has been as high as 9.37 and as low as 4.14, with a median of 5.49.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ECPG has a P/S ratio of 0.95. This compares to its industry's average P/S of 1.37.
These are only a few of the key metrics included in Encore Capital Group'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, ECPG looks like an impressive value stock at the moment.
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Encore Capital Group Inc (ECPG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).