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, 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.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
SM Energy (SM) is a stock many investors are watching right now. SM is currently sporting a Zacks Rank #1 (Strong Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 4.93, which compares to its industry's average of 10.29. Over the last 12 months, SM's Forward P/E has been as high as 6.51 and as low as 2.85, with a median of 4.90.
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. SM has a P/S ratio of 1.53. This compares to its industry's average P/S of 1.86.
Value investors will likely look at more than just these metrics, but the above data helps show that SM Energy is likely undervalued currently. And when considering the strength of its earnings outlook, SM sticks out as one of the market's strongest value stocks.
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SM Energy Company (SM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).