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Should Value Investors Buy Rent-A-Center (RCII) Stock?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company value investors might notice is Rent-A-Center (RCII - Free Report) . RCII is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 10.73. This compares to its industry's average Forward P/E of 11.52. Over the past year, RCII's Forward P/E has been as high as 13.19 and as low as 4.44, with a median of 10.15.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. RCII has a P/S ratio of 0.75. This compares to its industry's average P/S of 0.99.

Finally, investors will want to recognize that RCII has a P/CF ratio of 2.40. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 8.56. Over the past year, RCII's P/CF has been as high as 2.48 and as low as 0.79, with a median of 1.88.

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


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