Should Value Investors Buy Fairfax Financial (FRFHF) Stock?

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 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.

Fairfax Financial (FRFHF) is a stock many investors are watching right now. FRFHF is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 9.42, which compares to its industry's average of 28.18. FRFHF's Forward P/E has been as high as 9.46 and as low as 7.59, with a median of 8.45, all within the past year.

Another valuation metric that we should highlight is FRFHF's P/B ratio of 1.46. The P/B is a method of comparing a stock's market value to 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 1.54. Over the past 12 months, FRFHF's P/B has been as high as 1.46 and as low as 0.93, with a median of 1.16.

Finally, investors will want to recognize that FRFHF has a P/CF ratio of 7.94. 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. FRFHF's current P/CF looks attractive when compared to its industry's average P/CF of 10.82. Over the past 52 weeks, FRFHF's P/CF has been as high as 7.97 and as low as 5.04, with a median of 6.73.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Fairfax Financial is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, FRFHF feels like a great value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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