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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 Guess (GES). GES is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 10.43 right now. For comparison, its industry sports an average P/E of 11.43. Over the past year, GES's Forward P/E has been as high as 10.47 and as low as 3.90, with a median of 6.21.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. GES has a P/S ratio of 0.28. This compares to its industry's average P/S of 0.73.
Finally, our model also underscores that GES has a P/CF ratio of 9.63. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 23.18. Within the past 12 months, GES's P/CF has been as high as 9.64 and as low as 4.37, with a median of 6.11.
Value investors will likely look at more than just these metrics, but the above data helps show that Guess is likely undervalued currently. And when considering the strength of its earnings outlook, GES sticks out as one of the market's strongest value stocks.
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Guess?, Inc. (GES): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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