While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
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 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.
The Mosaic Company (MOS) is a stock many investors are watching right now. MOS is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 12.14. This compares to its industry's average Forward P/E of 13.82. Over the past year, MOS's Forward P/E has been as high as 14.13 and as low as 10.58, with a median of 12.35.
Another notable valuation metric for MOS is its P/B ratio of 0.74. The P/B ratio pits a stock's market value against 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 2.14. Over the past year, MOS's P/B has been as high as 0.84 and as low as 0.62, 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 prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. MOS has a P/S ratio of 0.79. This compares to its industry's average P/S of 1.29.
Finally, we should also recognize that MOS has a P/CF ratio of 6.43. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 14.49. Within the past 12 months, MOS's P/CF has been as high as 7.28 and as low as 4.68, with a median of 5.92.
Investors could also keep in mind Yara International ASA (YARIY), an Fertilizers stock with a Zacks Rank of # 2 (Buy) and Value grade of A.
Yara International ASA sports a P/B ratio of 1.07 as well; this compares to its industry's price-to-book ratio of 2.14. In the past 52 weeks, YARIY's P/B has been as high as 1.18, as low as 0.87, with a median of 1.01.
Value investors will likely look at more than just these metrics, but the above data helps show that The Mosaic Company and Yara International ASA are likely undervalued currently. And when considering the strength of its earnings outlook, MOS and YARIY 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
The Mosaic Company (MOS): Free Stock Analysis Report Yara International ASA (YARIY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
