Should Value Investors Buy Universal Health Services (UHS) Stock?

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.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Universal Health Services (UHS). UHS is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 8.83, which compares to its industry's average of 10.54. Over the past year, UHS's Forward P/E has been as high as 14.18 and as low as 7.60, with a median of 9.66.

We also note that UHS holds a PEG ratio of 0.74. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. UHS's industry currently sports an average PEG of 1.12. Within the past year, UHS's PEG has been as high as 0.79 and as low as 0.48, with a median of 0.62.

Another notable valuation metric for UHS is its P/B ratio of 1.73. 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 attractive against its industry's average P/B of 3.08. Over the past 12 months, UHS's P/B has been as high as 2.47 and as low as 1.42, with a median of 1.75.

Finally, we should also recognize that UHS has a P/CF ratio of 6.60. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 7.16. UHS's P/CF has been as high as 10.90 and as low as 5.42, with a median of 6.97, all within the past year.

These are only a few of the key metrics included in Universal Health Services's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, UHS looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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