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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company value investors might notice is Standard Motor Products (SMP). SMP is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 7.56, which compares to its industry's average of 10.86. SMP's Forward P/E has been as high as 10.50 and as low as 5.89, with a median of 9.09, all within the past year.
Another valuation metric that we should highlight is SMP's P/B ratio of 0.97. 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 solid versus its industry's average P/B of 1.97. Over the past 12 months, SMP's P/B has been as high as 1.18 and as low as 0.74, with a median of 1.03.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. SMP has a P/S ratio of 0.41. This compares to its industry's average P/S of 1.06.
Finally, our model also underscores that SMP has a P/CF ratio of 9.51. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. SMP's P/CF compares to its industry's average P/CF of 11.94. Within the past 12 months, SMP's P/CF has been as high as 11.69 and as low as 7.21, with a median of 10.31.
These are only a few of the key metrics included in Standard Motor Products's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, SMP looks like an impressive 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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