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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One stock to keep an eye on is Cars.com (CARS). CARS is currently holding a Zacks Rank #2 (Buy) and a Value grade of A.
Another valuation metric that we should highlight is CARS's P/B ratio of 1.76. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 5.12. Over the past year, CARS's P/B has been as high as 2.64 and as low as 1.30, with a median of 1.74.
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. CARS has a P/S ratio of 1.05. This compares to its industry's average P/S of 1.23.
Finally, we should also recognize that CARS has a P/CF ratio of 5.80. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 14.90. Over the past year, CARS's P/CF has been as high as 9.20 and as low as 4.20, with a median of 5.76.
These are just a handful of the figures considered in Cars.com's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that CARS is an impressive value stock right now.
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Cars.com Inc. (CARS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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