While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. 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 stock to keep an eye on is El Pollo Loco (LOCO). LOCO is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 11.63. This compares to its industry's average Forward P/E of 24.72. Over the past 52 weeks, LOCO's Forward P/E has been as high as 16.08 and as low as 9.83, with a median of 12.54.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. LOCO has a P/S ratio of 0.65. This compares to its industry's average P/S of 0.84.
Value investors will likely look at more than just these metrics, but the above data helps show that El Pollo Loco is likely undervalued currently. And when considering the strength of its earnings outlook, LOCO sticks out as one of the market's strongest value stocks.
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El Pollo Loco Holdings, Inc. (LOCO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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