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Should Value Investors Buy Smith & Wesson (SWBI) 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.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is Smith & Wesson (SWBI - Free Report) . SWBI is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock is trading with a P/E ratio of 9.75, which compares to its industry's average of 28.79. Over the past 52 weeks, SWBI's Forward P/E has been as high as 20.32 and as low as 4.69, with a median of 9.48.

Another valuation metric that we should highlight is SWBI's P/B ratio of 4.65. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 7.15. SWBI's P/B has been as high as 5.55 and as low as 1.94, with a median of 3.96, 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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. SWBI has a P/S ratio of 1.07. This compares to its industry's average P/S of 2.

Value investors will likely look at more than just these metrics, but the above data helps show that Smith & Wesson is likely undervalued currently. And when considering the strength of its earnings outlook, SWBI sticks out at as one of the market's strongest value stocks.


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