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Is Fresenius (FMS) a Great Value Stock Right Now?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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 company to watch right now is Fresenius (FMS). FMS is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 14.51, while its industry has an average P/E of 37.74. Over the past 52 weeks, FMS's Forward P/E has been as high as 17.28 and as low as 10.57, with a median of 13.93.

FMS is also sporting a PEG ratio of 2.75. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. FMS's industry has an average PEG of 3.13 right now. Over the past 52 weeks, FMS's PEG has been as high as 3.69 and as low as 2, with a median of 2.60.

We should also highlight that FMS has a P/B ratio of 1.55. 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 stock's P/B looks solid versus its industry's average P/B of 4.13. FMS's P/B has been as high as 1.75 and as low as 1.18, with a median of 1.48, 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. FMS has a P/S ratio of 1.16. This compares to its industry's average P/S of 3.15.

Finally, investors should note that FMS has a P/CF ratio of 7.36. 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. FMS's P/CF compares to its industry's average P/CF of 21.63. FMS's P/CF has been as high as 9.04 and as low as 5.59, with a median of 7.43, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Fresenius is likely undervalued currently. And when considering the strength of its earnings outlook, FMS sticks out at as one of the market's strongest value stocks.

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