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.
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 stock to keep an eye on is Federated Hermes (FHI). FHI is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 10.31. This compares to its industry's average Forward P/E of 17.30. Over the past year, FHI's Forward P/E has been as high as 13.06 and as low as 8.68, with a median of 9.67.
We also note that FHI holds a PEG ratio of 0.81. 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. FHI's industry has an average PEG of 1.19 right now. FHI's PEG has been as high as 1.46 and as low as 0.74, with a median of 1.09, all within the past year.
Another notable valuation metric for FHI is its P/B ratio of 3.33. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 3.78. Within the past 52 weeks, FHI's P/B has been as high as 3.77 and as low as 2.61, with a median of 3.12.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. FHI has a P/S ratio of 2.22. This compares to its industry's average P/S of 3.19.
Value investors will likely look at more than just these metrics, but the above data helps show that Federated Hermes is likely undervalued currently. And when considering the strength of its earnings outlook, FHI sticks out as one of the market's strongest value stocks.
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Federated Hermes, Inc. (FHI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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