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 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 company to watch right now is Telefonica (TEF). TEF is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 14.09. This compares to its industry's average Forward P/E of 20.42. Over the past 52 weeks, TEF's Forward P/E has been as high as 15.66 and as low as 11.65, with a median of 13.45.
Investors will also notice that TEF has a PEG ratio of 0.82. 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. TEF's PEG compares to its industry's average PEG of 1.63. Over the past 52 weeks, TEF's PEG has been as high as 0.82 and as low as 0.71, with a median of 0.77.
We should also highlight that TEF has a P/B ratio of 1.21. 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 stock's P/B looks solid versus its industry's average P/B of 2.46. Over the past 12 months, TEF's P/B has been as high as 1.23 and as low as 0.82, with a median of 0.99.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. TEF has a P/S ratio of 0.7. This compares to its industry's average P/S of 1.44.
These are only a few of the key metrics included in Telefonica'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, TEF looks like an impressive value stock at the moment.
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Telefonica SA (TEF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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