Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore 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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One stock to keep an eye on is CNA Financial (CNA). CNA is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 9.7, which compares to its industry's average of 27.87. Over the last 12 months, CNA's Forward P/E has been as high as 11.18 and as low as 9.52, with a median of 10.26.
Another notable valuation metric for CNA is its P/B ratio of 1.16. Investors use the P/B ratio to look at a stock's market value versus 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 1.51. Over the past year, CNA's P/B has been as high as 1.38 and as low as 1.10, with a median of 1.24.
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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CNA has a P/S ratio of 0.85. This compares to its industry's average P/S of 1.3.
Investors could also keep in mind The Travelers Companies (TRV), another Insurance - Property and Casualty stock with a Zacks Rank of #1 (Strong Buy) and Value grade of A.
Shares of The Travelers Companies are currently trading at a forward earnings multiple of 11.60 and a PEG ratio of 2.87 compared to its industry's P/E and PEG ratios of 27.87 and 3.68, respectively.
TRV's price-to-earnings ratio has been as high as 14.64 and as low as 11.13, with a median of 12.44, while its PEG ratio has been as high as 4.80 and as low as 1.01, with a median of 2.83, all within the past year.
The Travelers Companies sports a P/B ratio of 2.11 as well; this compares to its industry's price-to-book ratio of 1.51. In the past 52 weeks, TRV's P/B has been as high as 2.22, as low as 1.85, with a median of 2.07.
Value investors will likely look at more than just these metrics, but the above data helps show that CNA Financial and The Travelers Companies are likely undervalued currently. And when considering the strength of its earnings outlook, CNA and TRV sticks out as one of the market's strongest value stocks.
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CNA Financial Corporation (CNA): Free Stock Analysis Report The Travelers Companies, Inc. (TRV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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