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.
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 use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
Allstate (ALL) is a stock many investors are watching right now. ALL is currently sporting a Zacks Rank #2 (Buy) and an A for Value.
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. ALL has a P/S ratio of 0.84. This compares to its industry's average P/S of 1.3.
Finally, investors will want to recognize that ALL has a P/CF ratio of 8.66. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 12.95. Within the past 12 months, ALL's P/CF has been as high as 14.16 and as low as 8.07, with a median of 10.58.
Investors could also keep in mind NMI (NMIH), another Insurance - Property and Casualty stock with a Zacks Rank of #2 (Buy) and Value grade of A.
NMI is trading at a forward earnings multiple of 7.82 at the moment, with a PEG ratio of 1.11. This compares to its industry's average P/E of 28.00 and average PEG ratio of 4.28.
NMIH's Forward P/E has been as high as 8.92 and as low as 6.98, with a median of 7.87. During the same time period, its PEG ratio has been as high as 1.46, as low as 0.80, with a median of 1.11.
NMI sports a P/B ratio of 1.26 as well; this compares to its industry's price-to-book ratio of 1.56. In the past 52 weeks, NMIH's P/B has been as high as 1.62, as low as 1.10, with a median of 1.30.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Allstate and NMI are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ALL and NMIH feels like a great value stock at the moment.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Allstate Corporation (ALL): Free Stock Analysis Report NMI Holdings Inc (NMIH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
