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.
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 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 company value investors might notice is Edison International (EIX). EIX is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 9.24. This compares to its industry's average Forward P/E of 13.79. EIX's Forward P/E has been as high as 16.23 and as low as 8.63, with a median of 14.22, all within the past year.
Investors should also note that EIX holds a PEG ratio of 1.09. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. EIX's PEG compares to its industry's average PEG of 1.72. Over the past 52 weeks, EIX's PEG has been as high as 2.28 and as low as 1.02, with a median of 1.65.
Another notable valuation metric for EIX is its P/B ratio of 1.31. 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 2.18. Over the past 12 months, EIX's P/B has been as high as 2.09 and as low as 1.20, with a median of 1.81.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. EIX has a P/S ratio of 1.17. This compares to its industry's average P/S of 2.09.
Finally, we should also recognize that EIX has a P/CF ratio of 4.49. 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. EIX's current P/CF looks attractive when compared to its industry's average P/CF of 10.13. Over the past year, EIX's P/CF has been as high as 8.21 and as low as 4.10, with a median of 6.99.
Value investors will likely look at more than just these metrics, but the above data helps show that Edison International is likely undervalued currently. And when considering the strength of its earnings outlook, EIX sticks out at as one of the market's strongest value stocks.
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Edison International (EIX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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