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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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.
Penske Automotive (PAG) is a stock many investors are watching right now. PAG is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock holds a P/E ratio of 9.34, while its industry has an average P/E of 11.04. Over the last 12 months, PAG’s Forward P/E has been as high as 12.95 and as low as 3.82, with a median of 9.09.
Another notable valuation metric for PAG is its P/B ratio of 1.42. The P/B ratio pits a stock’s market value against its book value, which is defined as total assets minus total liabilities. This stock’s P/B looks attractive against its industry’s average P/B of 1.50. Within the past 52 weeks, PAG’s P/B has been as high as 1.66 and as low as 0.61, with a median of 1.37.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can’t really be manipulated, so sales are often a truer performance indicator. PAG has a P/S ratio of 0.19. This compares to its industry’s average P/S of 0.28.
Finally, investors will want to recognize that PAG has a P/CF ratio of 9.23. 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. PAG’s P/CF compares to its industry’s average P/CF of 11.41. Within the past 12 months, PAG’s P/CF has been as high as 9.37 and as low as 3.16, with a median of 7.20.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Penske Automotive is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, PAG feels like a great value stock at the moment.
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