Are Investors Undervaluing CarMax (KMX) Right Now?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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.

CarMax (KMX) is a stock many investors are watching right now. KMX is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 13.89, while its industry has an average P/E of 20.20. Over the last 12 months, KMX's Forward P/E has been as high as 25.16 and as low as 13.09, with a median of 19.26.

Investors will also notice that KMX has a PEG ratio of 0.88. 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. KMX's industry currently sports an average PEG of 1.49. KMX's PEG has been as high as 1.59 and as low as 0.83, with a median of 1.22, all within the past year.

These are only a few of the key metrics included in CarMax'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, KMX looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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