The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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 stock to keep an eye on is Textron (TXT). TXT is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 12.45, while its industry has an average P/E of 27.94. Over the last 12 months, TXT's Forward P/E has been as high as 14.02 and as low as 9.69, with a median of 12.08.
We also note that TXT holds a PEG ratio of 1.24. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. TXT's PEG compares to its industry's average PEG of 2.02. TXT's PEG has been as high as 1.39 and as low as 0.97, with a median of 1.20, all within the past year.
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. TXT has a P/S ratio of 1.03. This compares to its industry's average P/S of 2.3.
Finally, we should also recognize that TXT has a P/CF ratio of 12.17. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. TXT's current P/CF looks attractive when compared to its industry's average P/CF of 33.83. Within the past 12 months, TXT's P/CF has been as high as 13.51 and as low as 9.17, with a median of 11.77.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Textron is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, TXT feels like a great value stock at the moment.
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Textron Inc. (TXT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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