Should Value Investors Buy The Gap (GAP) Stock?

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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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.

The Gap (GAP) is a stock many investors are watching right now. GAP is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock holds a P/E ratio of 8.93, while its industry has an average P/E of 15.96. Over the past year, GAP's Forward P/E has been as high as 20.26 and as low as 8.09, with a median of 11.56.

Investors should also recognize that GAP has a P/B ratio of 2.47. 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 5.11. GAP's P/B has been as high as 4.02 and as low as 2.23, with a median of 2.91, over the past year.

Finally, we should also recognize that GAP has a P/CF ratio of 6.09. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 13.39. GAP's P/CF has been as high as 10.34 and as low as 5.50, with a median of 6.89, all within the past year.

These are just a handful of the figures considered in The Gap's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that GAP is an impressive value stock right now.

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

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