Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
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.
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 UGI (UGI). UGI is currently holding a Zacks Rank #1 (Strong Buy) and a Value grade of A. The stock is trading with P/E ratio of 11.11 right now. For comparison, its industry sports an average P/E of 15.16. UGI's Forward P/E has been as high as 11.70 and as low as 7.25, with a median of 9.54, all within the past year.
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. UGI has a P/S ratio of 1.05. This compares to its industry's average P/S of 1.6.
Finally, we should also recognize that UGI has a P/CF ratio of 6.04. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. UGI's current P/CF looks attractive when compared to its industry's average P/CF of 8.69. UGI's P/CF has been as high as 6.44 and as low as 3.81, with a median of 5.31, all within the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that UGI is likely undervalued currently. And when considering the strength of its earnings outlook, UGI sticks out as one of the market's strongest value stocks.
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UGI Corporation (UGI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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