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 use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One stock to keep an eye on is The Gap (GAP). GAP is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 10.3. This compares to its industry's average Forward P/E of 16.09. Over the past year, GAP's Forward P/E has been as high as 12.41 and as low as 7.35, with a median of 10.44.
Another valuation metric that we should highlight is GAP's P/B ratio of 2.41. 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 attractive against its industry's average P/B of 6.39. Over the past year, GAP's P/B has been as high as 3.28 and as low as 2.04, with a median of 2.60.
Finally, investors should note that GAP has a P/CF ratio of 6.07. 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. GAP's P/CF compares to its industry's average P/CF of 16.24. Within the past 12 months, GAP's P/CF has been as high as 8.00 and as low as 5.03, with a median of 6.28.
If you're looking for another solid Retail - Apparel and Shoes value stock, take a look at Hennes & Mauritz (HNNMY). HNNMY is a Zacks Rank of #2 (Buy) stock with a Value score of A.
Furthermore, Hennes & Mauritz holds a P/B ratio of 6.09 and its industry's price-to-book ratio is 6.39. HNNMY's P/B has been as high as 6.27, as low as 4.01, with a median of 4.87 over the past 12 months.
These figures are just a handful of the metrics value investors tend to look at, but they help show that The Gap and Hennes & Mauritz are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, GAP and HNNMY feels like a great value stock at the moment.
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The Gap, Inc. (GAP): Free Stock Analysis Report Hennes & Mauritz AB (HNNMY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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