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, 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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 company to watch right now is Norwegian Cruise Line (NCLH). NCLH is currently holding a Zacks Rank #1 (Strong Buy) and a Value grade of A. The stock has a Forward P/E ratio of 10.82. This compares to its industry's average Forward P/E of 18.68. Over the last 12 months, NCLH's Forward P/E has been as high as 15.63 and as low as 6.93, with a median of 10.82.
Investors will also notice that NCLH has a PEG ratio of 0.88. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NCLH's industry has an average PEG of 0.94 right now. Over the past 52 weeks, NCLH's PEG has been as high as 0.93 and as low as 0.15, with a median of 0.24.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. NCLH has a P/S ratio of 1.21. This compares to its industry's average P/S of 1.35.
Finally, investors should note that NCLH has a P/CF ratio of 6.78. 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. NCLH's P/CF compares to its industry's average P/CF of 15.12. Within the past 12 months, NCLH's P/CF has been as high as 9.67 and as low as 3.73, with a median of 6.53.
Value investors will likely look at more than just these metrics, but the above data helps show that Norwegian Cruise Line is likely undervalued currently. And when considering the strength of its earnings outlook, NCLH sticks out as one of the market's strongest value stocks.
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Norwegian Cruise Line Holdings Ltd. (NCLH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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