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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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.
One company to watch right now is Dollar General (DG). DG is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 13.16 right now. For comparison, its industry sports an average P/E of 28.92. Over the past 52 weeks, DG's Forward P/E has been as high as 21.73 and as low as 10.58, with a median of 17.26.
DG is also sporting a PEG ratio of 2.25. 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. DG's PEG compares to its industry's average PEG of 3.22. Over the past 52 weeks, DG's PEG has been as high as 2.95 and as low as 1.68, with a median of 2.41.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. DG has a P/S ratio of 0.45. This compares to its industry's average P/S of 0.65.
Finally, we should also recognize that DG has a P/CF ratio of 7.76. 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. DG's current P/CF looks attractive when compared to its industry's average P/CF of 28.53. DG's P/CF has been as high as 14.12 and as low as 7.47, with a median of 11.45, all within the past year.
These are only a few of the key metrics included in Dollar General'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, DG looks like an impressive value stock at the moment.
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