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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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 stock to keep an eye on is AES (AES). AES is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.
Investors should also note that AES holds a PEG ratio of 1.36. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AES's PEG compares to its industry's average PEG of 1.81. Over the last 12 months, AES's PEG has been as high as 1.89 and as low as 0.55, with a median of 0.81.
Investors should also recognize that AES has a P/B ratio of 0.92. 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 attractive against its industry's average P/B of 2.29. Over the past year, AES's P/B has been as high as 2.46 and as low as 0.91, with a median of 1.53.
Investors could also keep in mind PG&E (PCG), an Utility - Electric Power stock with a Zacks Rank of # 2 (Buy) and Value grade of A.
PG&E is currently trading with a Forward P/E ratio of 10.79 while its PEG ratio sits at 1.10. Both of the company's metrics compare favorably to its industry's average P/E of 14.31 and average PEG ratio of 1.81.
Over the past year, PCG's P/E has been as high as 14.79, as low as 10.07, with a median of 12.89; its PEG ratio has been as high as 1.54, as low as 1.05, with a median of 0.81 during the same time period.
PG&E also has a P/B ratio of 1.52 compared to its industry's price-to-book ratio of 2.29. Over the past year, its P/B ratio has been as high as 2.10, as low as 1.38, with a median of 1.88.
Value investors will likely look at more than just these metrics, but the above data helps show that AES and PG&E are likely undervalued currently. And when considering the strength of its earnings outlook, AES and PCG sticks out as one of the market's strongest value stocks.
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The AES Corporation (AES): Free Stock Analysis Report Pacific Gas & Electric Co. (PCG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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