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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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.
One company to watch right now is Donegal Group (DGICA - Free Report) . DGICA is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock has a Forward P/E ratio of 11.69. This compares to its industry's average Forward P/E of 22.39. DGICA's Forward P/E has been as high as 16.50 and as low as 10.55, with a median of 13.64, all within the past year.
Another valuation metric that we should highlight is DGICA's P/B ratio of 0.87. 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. DGICA's current P/B looks attractive when compared to its industry's average P/B of 1.20. Over the past year, DGICA's P/B has been as high as 0.99 and as low as 0.74, with a median of 0.92.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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. DGICA has a P/S ratio of 0.54. This compares to its industry's average P/S of 0.79.
These are only a few of the key metrics included in Donegal Group'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, DGICA looks like an impressive value stock at the moment.