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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One company value investors might notice is Arrow Electronics (ARW). ARW is currently sporting a Zacks Rank #1 (Strong Buy) and an A for Value. The stock is trading with P/E ratio of 9.44 right now. For comparison, its industry sports an average P/E of 14.50. Over the past year, ARW's Forward P/E has been as high as 11.05 and as low as 8.04, with a median of 9.71.
Investors should also note that ARW holds a PEG ratio of 0.46. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ARW's industry currently sports an average PEG of 0.71. Over the past 52 weeks, ARW's PEG has been as high as 0.55 and as low as 0.40, with a median of 0.49.
Another notable valuation metric for ARW is its P/B ratio of 0.98. 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. This stock's P/B looks attractive against its industry's average P/B of 1.72. Over the past year, ARW's P/B has been as high as 1.22 and as low as 0.78, with a median of 1.02.
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 preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ARW has a P/S ratio of 0.25. This compares to its industry's average P/S of 0.43.
Finally, we should also recognize that ARW has a P/CF ratio of 9.63. 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. ARW's P/CF compares to its industry's average P/CF of 16.16. Over the past year, ARW's P/CF has been as high as 11.55 and as low as 8.13, with a median of 10.03.
Value investors will likely look at more than just these metrics, but the above data helps show that Arrow Electronics is likely undervalued currently. And when considering the strength of its earnings outlook, ARW sticks out as one of the market's strongest value stocks.
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Arrow Electronics, Inc. (ARW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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