Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 company to watch right now is Century Communities (CCS). CCS is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 9.51, which compares to its industry's average of 12.02. Over the past 52 weeks, CCS's Forward P/E has been as high as 10.15 and as low as 5.33, with a median of 7.39.
Another valuation metric that we should highlight is CCS's P/B ratio of 0.76. The P/B ratio is used to compare a stock's market value with 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 1.43. Within the past 52 weeks, CCS's P/B has been as high as 1.36 and as low as 0.60, with a median of 0.81.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. CCS has a P/S ratio of 0.45. This compares to its industry's average P/S of 0.82.
Finally, investors should note that CCS has a P/CF ratio of 7.09. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 8.88. Within the past 12 months, CCS's P/CF has been as high as 10.00 and as low as 4.76, with a median of 6.59.
Another great Building Products - Home Builders stock you could consider is Persimmon (PSMMY), which is a Zacks Rank of #2 (Buy) stock with a Value Score of A.
Shares of Persimmon currently hold a Forward P/E ratio of 10.53, and its PEG ratio is 1.36. In comparison, its industry sports average P/E and PEG ratios of 12.02 and 2.12.
PSMMY's Forward P/E has been as high as 17.42 and as low as 9.54, with a median of 11.93. During the same time period, its PEG ratio has been as high as 1.50, as low as 0.68, with a median of 0.87.
Persimmon also has a P/B ratio of 1.03 compared to its industry's price-to-book ratio of 1.43. Over the past year, its P/B ratio has been as high as 1.69, as low as 0.92, with a median of 1.14.
Value investors will likely look at more than just these metrics, but the above data helps show that Century Communities and Persimmon are likely undervalued currently. And when considering the strength of its earnings outlook, CCS and PSMMY sticks out as one of the market's strongest value stocks.
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Century Communities, Inc. (CCS): Free Stock Analysis Report Persimmon Plc (PSMMY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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