4 Value Stocks to Buy as Rate Cuts Reshape Markets in 2026

Major U.S. equity indices edged lower in the latest session, as the market appears to catch its breath. The Dow Jones Industrial Average slipped 20.23 points, or 0.04%, to close at 48,710.97, while the S&P 500 fell 2.11 points, or 0.03%, ending at 6,929.94. The Nasdaq Composite declined marginally by 20.21 points, or 0.09%, to 23,593.10 due to some profit-booking in technology-heavy segments.

With only three trading days left in 2025, these fractional pullbacks point toward prudent risk management and portfolio rebalancing rather than an aggressive chase for incremental gains. This wait-and-see approach is typical as markets enter the final stretch of the year. Over the past 12 months, investors have navigated tariff-related uncertainty and geopolitical tensions while witnessing a powerful AI-driven rally and three consecutive cuts in benchmark interest rates.

As rate cuts begin to filter through the economy, companies with strong cash flows, reasonable valuations and resilient business models present a more compelling opportunity. With investors heading into the new year amid lingering macro uncertainty, value stocks offer a more disciplined path to returns. Often trading below their intrinsic value, these stocks offer a safety margin that is especially appealing during periods of market uncertainty.

When evaluating value stocks, one of the most effective valuation metrics is the Price to Cash Flow (P/CF) ratio. Companies like The AES Corporation AES, ScanSource, Inc. SCSC, PG&E Corporation PCG and EnerSys ENS boast a low P/CF ratio. The P/CF ratio evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per-share basis — the lower the number, the better.

Price to Cash Flow Reflects Financial Health

You must be wondering why we consider the P/CF valuation metric when the most widely used valuation metric is Price/Earnings (or P/E). An important factor that makes P/CF a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly diagnosing a company’s financial health.

Analysts caution that a company’s earnings are subject to accounting estimates and management manipulation. Then again, cash flow is quite reliable. Net cash flow unveils how much money a company generates and how effectively management is deploying the same.

Positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, meet its expenses, reinvest in the business, endure downturns and finally undertake shareholder-friendly moves. Negative cash flow implies a decline in the company’s liquidity, which, in turn, lowers its flexibility to support these endeavors.

What’s the Best Value Investing Strategy?

An investment decision based solely on the P/CF metric may not yield the desired results. To identify stocks that are trading at a discount, you should expand your search criteria and also consider the price-to-book ratio, price-to-earnings ratio and price-to-sales ratio. Adding a favorable Zacks Rank and a Value Score of A or B to your search criteria should lead to even better results as these eliminate the chance of falling into a value trap.

Here are the parameters for selecting true-value stocks:

P/CF less than or equal to X-Industry Median.

Price greater than or equal to 5: The stocks must all be trading at a minimum of $5 or higher.

Average 20-Day Volume greater than 100,000: A substantial trading volume ensures that the stock is easily tradable.

P/E using (F1) less than or equal to X-Industry Median: This parameter shortlists stocks that are trading at a discount or are equal to their peers.

P/B less than or equal to X-Industry Median: A lower P/B compared with the industry average implies that there is enough room for the stock to gain.

P/S less than or equal to X-Industry Median: The P/S ratio determines how a stock price compares to the company’s sales — the lower the ratio, the more attractive the stock is.

PEG less than 1: The ratio is used to determine a stock's value by taking the company's earnings growth into account. The PEG ratio gives a more complete picture than the P/E ratio. A value of less than 1 indicates that the stock is undervalued and that investors need to pay less for a stock that has robust earnings growth prospects.

Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.

Value Score of less than or equal to B: Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 or 2 offer the best upside potential.

Here are four out of the eight value stocks that qualified the screening:

The AES Corporation, a global energy company, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 14.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for AES Corporation’s current financial-year sales and EPS indicates growth of 4.7% and 1.9%, respectively, from the year-ago period. AES has a Value Score of A. Shares of AES have advanced 11.2% in the past year.

ScanSource, a leading technology distributor uniquely positioned to address complex, converging technologies, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 8.9%, on average.

The Zacks Consensus Estimate for ScanSource’s current financial-year sales and EPS suggests growth of 3.9% and 15.7%, respectively, from the year-ago period. SCSC has a Value Score of A. Shares of SCSC have declined 15.8% in the past year.

PG&E Corporation, an energy holding company that owns Pacific Gas and Electric Company, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 0.5%, on average. 

The Zacks Consensus Estimate for PG&E Corporation’s current financial-year sales and EPS calls for growth of 6% and 10.3%, respectively, from the year-ago period. PCG has a Value Score of A. Shares of PCG have declined 21.7% in the past year.

EnerSys, a global leader in stored energy solutions, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 4.9%, on average.

The Zacks Consensus Estimate for EnerSys’ current financial-year sales and EPS implies growth of 4% and 1.3%, respectively, from the year-ago period. ENS has a Value Score of B. Shares of ENS have surged 62.6% in the past year.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies is available at: https://www.zacks.com/performance.

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