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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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.
One company to watch right now is Northwest Natural (NWN). NWN is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 13.65. This compares to its industry's average Forward P/E of 20.15. Over the past 52 weeks, NWN's Forward P/E has been as high as 17.00 and as low as 13.15, with a median of 14.11.
Another valuation metric that we should highlight is NWN's P/B ratio of 1.15. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. NWN's current P/B looks attractive when compared to its industry's average P/B of 1.33. Over the past 12 months, NWN's P/B has been as high as 1.25 and as low as 1.09, with a median of 1.15.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. NWN has a P/S ratio of 1.34. This compares to its industry's average P/S of 1.62.
Finally, we should also recognize that NWN has a P/CF ratio of 5.90. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 9.88. Within the past 12 months, NWN's P/CF has been as high as 7.39 and as low as 5.62, with a median of 6.68.
These are just a handful of the figures considered in Northwest Natural'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 NWN is an impressive value stock right now.
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Northwest Natural Gas Company (NWN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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