Are Investors Undervaluing Meritor (MTOR) Right Now?

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.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. 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 stock to keep an eye on is Meritor (MTOR). MTOR is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 5.92. This compares to its industry's average Forward P/E of 11.70. Over the past year, MTOR's Forward P/E has been as high as 7.71 and as low as 4.75, with a median of 6.19.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. MTOR has a P/S ratio of 0.35. This compares to its industry's average P/S of 0.41.

Finally, investors should note that MTOR has a P/CF ratio of 4.51. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 6.59. MTOR's P/CF has been as high as 8.91 and as low as 3.80, with a median of 5.59, all within the past year.

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

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