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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 value investors might notice is First American Financial (FAF). FAF is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 11.6. This compares to its industry's average Forward P/E of 27.68. FAF's Forward P/E has been as high as 15.32 and as low as 9.75, with a median of 11.61, all within the past year.
Another valuation metric that we should highlight is FAF's P/B ratio of 1.33. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.54. FAF's P/B has been as high as 1.43 and as low as 1.08, with a median of 1.29, over the past year.
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. FAF has a P/S ratio of 1.04. This compares to its industry's average P/S of 1.3.
These are only a few of the key metrics included in First American Financial's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, FAF looks like an impressive value stock at the moment.
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First American Financial Corporation (FAF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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