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, value investing is easily one of the most popular ways to find great stocks in any market environment. 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 Ericsson (ERIC). ERIC is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 11.64, while its industry has an average P/E of 16.06. Over the past year, ERIC's Forward P/E has been as high as 12.90 and as low as 7.76, with a median of 10.43.
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. ERIC has a P/S ratio of 0.68. This compares to its industry's average P/S of 1.5.
Finally, we should also recognize that ERIC has a P/CF ratio of 6.52. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 17.97. Within the past 12 months, ERIC's P/CF has been as high as 7.28 and as low as 5.25, with a median of 6.36.
Nokia (NOK) may be another strong Wireless Equipment stock to add to your shortlist. NOK is a # 2 (Buy) stock with a Value grade of A.
Shares of Nokia currently holds a Forward P/E ratio of 9.21, and its PEG ratio is 5.23. In comparison, its industry sports average P/E and PEG ratios of 16.06 and 1.12.
NOK's price-to-earnings ratio has been as high as 11.57 and as low as 8.60, with a median of 10.09, while its PEG ratio has been as high as 6.39 and as low as 4.86, with a median of 5.63, all within the past year.
Furthermore, Nokia holds a P/B ratio of 1.04 and its industry's price-to-book ratio is 5.20. NOK's P/B has been as high as 1.46, as low as 0.97, with a median of 1.21 over the past 12 months.
Value investors will likely look at more than just these metrics, but the above data helps show that Ericsson and Nokia are likely undervalued currently. And when considering the strength of its earnings outlook, ERIC and NOK sticks out as one of the market's strongest value stocks.
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