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Should Value Investors Buy Now (DNOW) Stock?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

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 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 stock to keep an eye on is Now (DNOW). DNOW is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 22.09 right now. For comparison, its industry sports an average P/E of 40.89. Over the past 52 weeks, DNOW's Forward P/E has been as high as 50.67 and as low as 16.37, with a median of 28.27.

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. DNOW has a P/S ratio of 0.41. This compares to its industry's average P/S of 0.78.

Finally, we should also recognize that DNOW has a P/CF ratio of 12.09. 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. DNOW's P/CF compares to its industry's average P/CF of 17.61. DNOW's P/CF has been as high as 37.67 and as low as 12.09, with a median of 16.53, all within the past year.

These are only a few of the key metrics included in Now'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, DNOW looks like an impressive value stock at the moment.

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