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How to Find Undervalued Stocks in an Overvalued Market
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The Dow Jones Industrial Average could soon hit 20,000 for the first time ever in its storied history, and other closely-followed indexes have recently hit record highs. This bull run, however, is leading some to believe the market is becoming overvalued.
But how do you find undervalued stocks in this market climate? An easy way to navigate through an overvalued market is by utilizing high quality stock screeners. Screening helps investors narrow down companies based on the essential ability to meet every condition important to the user. Any stock that misses even one of the requirements will be filtered out.
This lets investors easily choose ideal-for-them metrics. Screens are effective because they only keep the best in, helping you select criteria that you believe will lead to an increase in price. It isn’t always easy to create a successful screen, but with Zacks Premium Screens, investors have reaped profits time and time again. Our predefined criteria are carefully chosen to capture stocks with the best opportunity to beat the market.
Today, I’ve found three underrated stocks using one of our more popular premium screens, Undervalued Zacks #1 Rank Stocks. Some of the metrics of this screen include:
Zacks Rank #1 (Strong Buy)
Price per share of greater than or equal to $5
Average trading volume of greater than or equal to 100,000 shares
Forward PE of less than or equal to 20
Price to Sales (P/S) ratio of less than or equal to 1
Let’s see what the screen has discovered this time around.
Best Buy
Best Buy (BBY - Free Report) is a popular home, office, and personal electronics and appliances retailer that has made pointed efforts over the years to improve its e-commerce business in the wake of Amazon’s (AMZN) domination of online shopping. BBY trades at just over $48 a share, and is a Zacks Rank #1 (Strong Buy), with a Value Style Score of ‘A.’ Best Buy boasts a solid combination of a Forward PE of 14.98 and P/S ratio of 0.39, and with its decent dividend yield of 2.3%, BBY looks to be a good value pick.
However, Best Buy’s recent earnings estimate activity is what really makes the stock stand out. For the current year, the company’s earnings are expected to see year-over-year growth of 17.6%, with 10 upward revisions in the past 60 days compared to none lower. This estimate strength has undoubtedly helped push BBY to its stellar #1 (Strong Buy) ranking.
Dean Foods
A processor and distributor of fresh milk and other dairy products, Dean Foods Co. is a giant in the industry, offering a full line of company-branded and private label items that have become a consumer favorite in the diary aisles over the years. DF sits at a #1 (Strong Buy) on the Zacks Rank, and has a Value Style Score of ‘A.’
Trading at roughly $21 per share, Dean Foods has a Forward PE of 12.94 and a P/S ratio of 0.25, both metrics well-positioned in comparison to its broader industry’s, Food-Dairy Products, figures of 18.83 and 1.22, respectively. Like Best Buy, the country’s top dairy distributor has seen its Zacks Consensus Estimate for the current year increase 3.2% over the last 60 days, now projected to gain over 31% year-over-year with seven positive revisions. Taken all together, DF is an undervalued stock in a rebounding industry, poised to outperform in the coming months.
Aegean Marine Petroleum
Arguably the lesser known company on this list, Aegean Marine Petroleum Inc. is a marine fuel logistics company that physically supplies and markets refined marine fuel to ships in port and at sea. ANW also trades at the lowest price, sitting at nearly $11 a share. Aegean is a #1 (Strong Buy) on the Zacks Rank, and has a Value Style Score of ‘A.’
ANW, with its strong Forward PE of 8.97 and P/S ratio of 0.12, is a stock on the right path. Aegean has returned over 37% in the past month, and recent positive earnings estimate revision activity has bolstered its current year Zacks Consensus Estimate, now forecasted to grow more than 46% year-over-year. From this perspective, Aegean’s future is a valuable one, and investors would be wise to take advantage now.
Bottom Line
As the stock market continues to reach unprecedented new highs, taking advantage of undervalued stocks becomes more important than ever. These stocks don’t stay undervalued for long, and finding them in time, before other hungry investors, can be difficult to do.
To begin using Zacks Premium Screens to discover more stock picks based on metrics most important to you—plus, gain access to the Zacks #1 Rank List, +1,000 Equity Research Reports, Earnings Surprise Filter, the award-winning Focus List portfolio of 50-longer-term stocks and much more—start your 30-day free trial to Zacks Premium now.
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How to Find Undervalued Stocks in an Overvalued Market
The Dow Jones Industrial Average could soon hit 20,000 for the first time ever in its storied history, and other closely-followed indexes have recently hit record highs. This bull run, however, is leading some to believe the market is becoming overvalued.
But how do you find undervalued stocks in this market climate? An easy way to navigate through an overvalued market is by utilizing high quality stock screeners. Screening helps investors narrow down companies based on the essential ability to meet every condition important to the user. Any stock that misses even one of the requirements will be filtered out.
This lets investors easily choose ideal-for-them metrics. Screens are effective because they only keep the best in, helping you select criteria that you believe will lead to an increase in price. It isn’t always easy to create a successful screen, but with Zacks Premium Screens, investors have reaped profits time and time again. Our predefined criteria are carefully chosen to capture stocks with the best opportunity to beat the market.
Today, I’ve found three underrated stocks using one of our more popular premium screens, Undervalued Zacks #1 Rank Stocks. Some of the metrics of this screen include:
Let’s see what the screen has discovered this time around.
Best Buy
Best Buy (BBY - Free Report) is a popular home, office, and personal electronics and appliances retailer that has made pointed efforts over the years to improve its e-commerce business in the wake of Amazon’s (AMZN) domination of online shopping. BBY trades at just over $48 a share, and is a Zacks Rank #1 (Strong Buy), with a Value Style Score of ‘A.’ Best Buy boasts a solid combination of a Forward PE of 14.98 and P/S ratio of 0.39, and with its decent dividend yield of 2.3%, BBY looks to be a good value pick.
However, Best Buy’s recent earnings estimate activity is what really makes the stock stand out. For the current year, the company’s earnings are expected to see year-over-year growth of 17.6%, with 10 upward revisions in the past 60 days compared to none lower. This estimate strength has undoubtedly helped push BBY to its stellar #1 (Strong Buy) ranking.
Dean Foods
A processor and distributor of fresh milk and other dairy products, Dean Foods Co. is a giant in the industry, offering a full line of company-branded and private label items that have become a consumer favorite in the diary aisles over the years. DF sits at a #1 (Strong Buy) on the Zacks Rank, and has a Value Style Score of ‘A.’
Trading at roughly $21 per share, Dean Foods has a Forward PE of 12.94 and a P/S ratio of 0.25, both metrics well-positioned in comparison to its broader industry’s, Food-Dairy Products, figures of 18.83 and 1.22, respectively. Like Best Buy, the country’s top dairy distributor has seen its Zacks Consensus Estimate for the current year increase 3.2% over the last 60 days, now projected to gain over 31% year-over-year with seven positive revisions. Taken all together, DF is an undervalued stock in a rebounding industry, poised to outperform in the coming months.
Aegean Marine Petroleum
Arguably the lesser known company on this list, Aegean Marine Petroleum Inc. is a marine fuel logistics company that physically supplies and markets refined marine fuel to ships in port and at sea. ANW also trades at the lowest price, sitting at nearly $11 a share. Aegean is a #1 (Strong Buy) on the Zacks Rank, and has a Value Style Score of ‘A.’
ANW, with its strong Forward PE of 8.97 and P/S ratio of 0.12, is a stock on the right path. Aegean has returned over 37% in the past month, and recent positive earnings estimate revision activity has bolstered its current year Zacks Consensus Estimate, now forecasted to grow more than 46% year-over-year. From this perspective, Aegean’s future is a valuable one, and investors would be wise to take advantage now.
Bottom Line
As the stock market continues to reach unprecedented new highs, taking advantage of undervalued stocks becomes more important than ever. These stocks don’t stay undervalued for long, and finding them in time, before other hungry investors, can be difficult to do.
To begin using Zacks Premium Screens to discover more stock picks based on metrics most important to you—plus, gain access to the Zacks #1 Rank List, +1,000 Equity Research Reports, Earnings Surprise Filter, the award-winning Focus List portfolio of 50-longer-term stocks and much more—start your 30-day free trial to Zacks Premium now.