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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. 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 ArcelorMittal (MT). MT is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 5.26. This compares to its industry's average Forward P/E of 7.06. MT's Forward P/E has been as high as 12.71 and as low as 2.06, with a median of 5.51, all within the past year.
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. MT has a P/S ratio of 0.27. This compares to its industry's average P/S of 0.32.
Finally, our model also underscores that MT has a P/CF ratio of 2.51. 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 7.42. MT's P/CF has been as high as 2.94 and as low as 0.95, with a median of 1.51, all within the past year.
Ryerson (RYI) may be another strong Steel - Producers stock to add to your shortlist. RYI is a # 2 (Buy) stock with a Value grade of A.
Ryerson sports a P/B ratio of 1.42 as well; this compares to its industry's price-to-book ratio of 1.58. In the past 52 weeks, RYI's P/B has been as high as 1.79, as low as 0.90, with a median of 1.36.
These are only a few of the key metrics included in ArcelorMittal and Ryerson strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, MT and RYI look like an impressive value stock at the moment.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report