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.
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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 company value investors might notice is XP (XP). XP is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 10.43. This compares to its industry's average Forward P/E of 13.57. Over the past year, XP's Forward P/E has been as high as 12.34 and as low as 1.97, with a median of 9.21.
We should also highlight that XP has a P/B ratio of 2.7. 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 solid versus its industry's average P/B of 2.92. Within the past 52 weeks, XP's P/B has been as high as 3.08 and as low as 1.60, with a median of 2.34.
Finally, we should also recognize that XP has a P/CF ratio of 11.68. 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. XP's current P/CF looks attractive when compared to its industry's average P/CF of 14.30. Over the past year, XP's P/CF has been as high as 12.54 and as low as 6.71, with a median of 9.85.
Value investors will likely look at more than just these metrics, but the above data helps show that XP is likely undervalued currently. And when considering the strength of its earnings outlook, XP sticks out as one of the market's strongest value stocks.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
XP Inc. (XP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
