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Are Investors Undervaluing Armour Residential REIT (ARR) Right Now?

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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.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

Armour Residential REIT (ARR - Free Report) is a stock many investors are watching right now. ARR is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 8.76 right now. For comparison, its industry sports an average P/E of 8.95. ARR's Forward P/E has been as high as 10.90 and as low as 8.45, with a median of 9.47, all within the past year.

Investors should also recognize that ARR has a P/B ratio of 0.77. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 1.12. Over the past year, ARR's P/B has been as high as 0.84 and as low as 0.68, with a median of 0.78.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ARR has a P/S ratio of 2.66. This compares to its industry's average P/S of 3.61.

Finally, investors should note that ARR has a P/CF ratio of 4.27. 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. ARR's P/CF compares to its industry's average P/CF of 4.45. Within the past 12 months, ARR's P/CF has been as high as 4.72 and as low as 3.90, with a median of 4.34.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Armour Residential REIT is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ARR feels like a great value stock at the moment.


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