Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 Exelixis (EXEL). EXEL is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 13.5, which compares to its industry's average of 37.39. Over the last 12 months, EXEL's Forward P/E has been as high as 19.07 and as low as 12.30, with a median of 15.29.
We also note that EXEL holds a PEG ratio of 0.65. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EXEL's industry has an average PEG of 1.88 right now. Over the last 12 months, EXEL's PEG has been as high as 1.19 and as low as 0.46, with a median of 0.73.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. EXEL has a P/S ratio of 5.02. This compares to its industry's average P/S of 7.05.
Value investors will likely look at more than just these metrics, but the above data helps show that Exelixis is likely undervalued currently. And when considering the strength of its earnings outlook, EXEL sticks out as one of the market's strongest value stocks.
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Exelixis, Inc. (EXEL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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