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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 Sodexo (SDXAY). SDXAY is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 15.04, which compares to its industry's average of 18.92. Over the last 12 months, SDXAY's Forward P/E has been as high as 19.97 and as low as 12.60, with a median of 15.46.
Investors should also recognize that SDXAY has a P/B ratio of 2.85. The P/B ratio is used to compare a stock's market value with 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 4.04. Over the past 12 months, SDXAY's P/B has been as high as 3.79 and as low as 2.24, with a median of 2.76.
Investors could also keep in mind Secom Co. (SOMLY), an Business - Services stock with a Zacks Rank of # 2 (Buy) and Value grade of A.
Secom Co. sports a P/B ratio of 1.38 as well; this compares to its industry's price-to-book ratio of 4.04. In the past 52 weeks, SOMLY's P/B has been as high as 1.65, as low as 1.23, with a median of 1.45.
These are just a handful of the figures considered in Sodexo and Secom Co.'s great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that SDXAY and SOMLY is an impressive value stock right now.
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