Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 Best Buy (BBY - Free Report) . BBY is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 14.86. This compares to its industry's average Forward P/E of 20.04. Over the last 12 months, BBY's Forward P/E has been as high as 18.83 and as low as 7.95, with a median of 14.08.
Investors will also notice that BBY has a PEG ratio of 1.75. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. BBY's industry has an average PEG of 2.24 right now. Over the last 12 months, BBY's PEG has been as high as 2.48 and as low as 0.98, with a median of 1.64.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. BBY has a P/S ratio of 0.64. This compares to its industry's average P/S of 0.76.
Value investors will likely look at more than just these metrics, but the above data helps show that Best Buy is likely undervalued currently. And when considering the strength of its earnings outlook, BBY sticks out at as one of the market's strongest value stocks.