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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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.
Ericsson (ERIC) is a stock many investors are watching right now. ERIC is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 14.34, while its industry has an average P/E of 31.87. Over the last 12 months, ERIC's Forward P/E has been as high as 18.61 and as low as 12.48, with a median of 15.38.
Investors should also recognize that ERIC has a P/B ratio of 3.05. 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 company's current P/B looks solid when compared to its industry's average P/B of 6.03. Over the past 12 months, ERIC's P/B has been as high as 3.73 and as low as 2.72, with a median of 3.22.
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. ERIC has a P/S ratio of 1.56. This compares to its industry's average P/S of 2.22.
Finally, we should also recognize that ERIC has a P/CF ratio of 22.19. 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 stock's P/CF looks attractive against its industry's average P/CF of 43.33. Over the past year, ERIC's P/CF has been as high as 30.43 and as low as -47.05, with a median of 22.19.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Ericsson is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ERIC feels like a great value stock at the moment.
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Ericsson (ERIC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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