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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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 The Hanover Insurance Group (THG). THG is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 10.97 right now. For comparison, its industry sports an average P/E of 27.63. Over the past 52 weeks, THG's Forward P/E has been as high as 13.52 and as low as 10.12, with a median of 11.27.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by 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. THG has a P/S ratio of 0.98. This compares to its industry's average P/S of 1.28.
Finally, investors will want to recognize that THG has a P/CF ratio of 11.32. 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. THG's P/CF compares to its industry's average P/CF of 12.74. Over the past 52 weeks, THG's P/CF has been as high as 19.14 and as low as 10.39, with a median of 13.64.
If you're looking for another solid Insurance - Property and Casualty value stock, take a look at The Travelers Companies (TRV). TRV is a Zacks Rank of #2 (Buy) stock with a Value score of A.
The Travelers Companies is trading at a forward earnings multiple of 11.59 at the moment, with a PEG ratio of 2.86. This compares to its industry's average P/E of 27.63 and average PEG ratio of 4.23.
Over the last 12 months, TRV's P/E has been as high as 14.64, as low as 11.13, with a median of 12.45, and its PEG ratio has been as high as 4.80, as low as 1.01, with a median of 2.82.
The Travelers Companies also has a P/B ratio of 2.11 compared to its industry's price-to-book ratio of 1.53. Over the past year, its P/B ratio has been as high as 2.22, as low as 1.85, with a median of 2.07.
These are only a few of the key metrics included in The Hanover Insurance Group and The Travelers Companies strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, THG and TRV look like an impressive value stock at the moment.
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The Hanover Insurance Group, Inc. (THG): Free Stock Analysis Report The Travelers Companies, Inc. (TRV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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