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.
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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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.
Lovesac (LOVE) is a stock many investors are watching right now. LOVE is currently sporting a Zacks Rank #1 (Strong Buy), as well as a Value grade of A. The stock holds a P/E ratio of 19.93, while its industry has an average P/E of 20.83. Over the past year, LOVE's Forward P/E has been as high as 62.22 and as low as 11.65, with a median of 18.76.
Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. LOVE has a P/S ratio of 0.45. This compares to its industry's average P/S of 1.24.
Finally, our model also underscores that LOVE has a P/CF ratio of 13.14. 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. LOVE's current P/CF looks attractive when compared to its industry's average P/CF of 13.82. Over the past 52 weeks, LOVE's P/CF has been as high as 27.69 and as low as 7.84, with a median of 15.10.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Lovesac is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, LOVE feels like a great value stock at the moment.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Lovesac Company (LOVE): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
