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.
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 company value investors might notice is Standard Motor Products (SMP). SMP is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock has a Forward P/E ratio of 6.30. This compares to its industry's average Forward P/E of 10.73. Over the past 52 weeks, SMP's Forward P/E has been as high as 10.50 and as low as 5.89, with a median of 9.27.
Investors should also recognize that SMP has a P/B ratio of 0.82. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. SMP's current P/B looks attractive when compared to its industry's average P/B of 1.92. Over the past year, SMP's P/B has been as high as 1.18 and as low as 0.76, with a median of 1.05.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. SMP has a P/S ratio of 0.37. This compares to its industry's average P/S of 0.96.
Finally, investors will want to recognize that SMP has a P/CF ratio of 8.63. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 11.48. Over the past 52 weeks, SMP's P/CF has been as high as 12.18 and as low as 8.02, with a median of 10.53.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Standard Motor Products is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, SMP feels like a great value stock at the moment.
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Standard Motor Products, Inc. (SMP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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