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 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 Kohl's (KSS). KSS is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.
Another notable valuation metric for KSS is its P/B ratio of 0.59. 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 solid versus its industry's average P/B of 1.72. Over the past year, KSS's P/B has been as high as 0.87 and as low as 0.54, with a median of 0.69.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. KSS has a P/S ratio of 0.13. This compares to its industry's average P/S of 0.18.
Finally, investors will want to recognize that KSS has a P/CF ratio of 2.20. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. KSS's current P/CF looks attractive when compared to its industry's average P/CF of 6.69. Over the past year, KSS's P/CF has been as high as 5.26 and as low as 2.01, with a median of 2.64.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Kohl's is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, KSS feels like a great value stock at the moment.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
