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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 value investors might notice is Open Text (OTEX). OTEX is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A.
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. OTEX has a P/S ratio of 1.86. This compares to its industry's average P/S of 4.38.
Finally, our model also underscores that OTEX has a P/CF ratio of 8.67. 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 stock's P/CF looks attractive against its industry's average P/CF of 24.08. Over the past 52 weeks, OTEX's P/CF has been as high as 8.83 and as low as 4.55, with a median of 6.00.
Value investors will likely look at more than just these metrics, but the above data helps show that Open Text is likely undervalued currently. And when considering the strength of its earnings outlook, OTEX sticks out as one of the market's strongest value stocks.
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Open Text Corporation (OTEX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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