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.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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 First American Financial (FAF). FAF is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 11.43, while its industry has an average P/E of 28.12. Over the past year, FAF's Forward P/E has been as high as 15.32 and as low as 9.75, with a median of 11.61.
Another notable valuation metric for FAF is its P/B ratio of 1.31. 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 1.52. Over the past 12 months, FAF's P/B has been as high as 1.43 and as low as 1.08, with a median of 1.29.
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. FAF has a P/S ratio of 0.92. This compares to its industry's average P/S of 1.34.
These figures are just a handful of the metrics value investors tend to look at, but they help show that First American Financial is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, FAF feels like a great value stock at the moment.
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First American Financial Corporation (FAF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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