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Should Value Investors Buy ADT (ADT) Stock?

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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, value investing is easily one of the most popular ways to find great stocks in any market environment. 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.

ADT (ADT - Free Report) is a stock many investors are watching right now. ADT is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 8.96 right now. For comparison, its industry sports an average P/E of 19.84. ADT's Forward P/E has been as high as 13.15 and as low as 3.77, with a median of 7.61, all within the past year.

We also note that ADT holds a PEG ratio of 1.11. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ADT's industry currently sports an average PEG of 3.18. ADT's PEG has been as high as 4.46 and as low as 0.91, with a median of 1.52, all within the past year.

We should also highlight that ADT has a P/B ratio of 2.13. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. ADT's current P/B looks attractive when compared to its industry's average P/B of 2.42. ADT's P/B has been as high as 3.67 and as low as 0.87, with a median of 1.94, over the past year.

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 prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ADT has a P/S ratio of 1.27. This compares to its industry's average P/S of 3.34.

Finally, we should also recognize that ADT has a P/CF ratio of 5.11. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. ADT's current P/CF looks attractive when compared to its industry's average P/CF of 8.25. Over the past year, ADT's P/CF has been as high as 7.80 and as low as 1.75, with a median of 4.47.

These are just a handful of the figures considered in ADT's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that ADT is an impressive value stock right now.


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