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, 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 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.
One stock to keep an eye on is National Vision (EYE Quick QuoteEYE – Free Report) . EYE is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.
EYE is also sporting a PEG ratio of 1.34. 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. EYE’s industry has an average PEG of 1.68 right now. Over the last 12 months, EYE’s PEG has been as high as 2.21 and as low as 1.21, with a median of 1.62.
Investors should also recognize that EYE has a P/B ratio of 1.36. 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 company’s current P/B looks solid when compared to its industry’s average P/B of 3.82. EYE’s P/B has been as high as 3.80 and as low as 1.20, with a median of 2.10, over the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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. EYE has a P/S ratio of 0.6. This compares to its industry’s average P/S of 1.55.
Finally, we should also recognize that EYE has a P/CF ratio of 9.60. This metric focuses on a firm’s operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. EYE’s current P/CF looks attractive when compared to its industry’s average P/CF of 29.15. Within the past 12 months, EYE’s P/CF has been as high as 23.58 and as low as 8.45, with a median of 15.72.
Value investors will likely look at more than just these metrics, but the above data helps show that National Vision is likely undervalued currently. And when considering the strength of its earnings outlook, EYE sticks out at as one of the market’s strongest value stocks.