While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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 Sally Beauty (SBH). SBH is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 7.76. This compares to its industry's average Forward P/E of 17.88. Over the past year, SBH's Forward P/E has been as high as 8.12 and as low as 4.04, with a median of 5.53.
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. SBH has a P/S ratio of 0.42. This compares to its industry's average P/S of 0.78.
Value investors will likely look at more than just these metrics, but the above data helps show that Sally Beauty is likely undervalued currently. And when considering the strength of its earnings outlook, SBH sticks out as one of the market's strongest value stocks.
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Sally Beauty Holdings, Inc. (SBH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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