For Immediate Release
Chicago, IL – September 23, 2021 – Stocks in this week’s article are Group 1 Automotive, Inc. (
GPI Quick Quote GPI - Free Report) , Adtalem Global Education Inc. ( ATGE Quick Quote ATGE - Free Report) , Repsol, S.A. ( REPYY Quick Quote REPYY - Free Report) , ArcBest Corporation ( ARCB Quick Quote ARCB - Free Report) and Panasonic Corporation ( PCRFY Quick Quote PCRFY - Free Report) . Value Stocks Based on PEG for a Challenging Market
Thanks to the one-and-a-half-year long pandemic-driven market selloffs, a number of growth stocks moved into the undervalued territory. However, with the ongoing extensive rollout of vaccines across nations as well as the gradual easing of the COVID-19 economic fear factor, market watchers believe that steep rebounds are in the cards for these beaten-down stocks anytime soon.
At this point in time, with many fundamentally great stocks now at their lows, investors are searching for a suitable investment option. They may currently resort to
value investment to capitalize on the long-term potential of these stocks.
However, this apparently simple-to-understand investing discipline has its own share of pitfalls. Value investors, while betting on stocks, often fall prey to companies that have weak prospects. This may often lead to “value traps” — a situation when these value picks start to underperform over the long run as the temporary problems, which once drove the share price down, turn out to be persistent.
And here comes the importance of this not-so-popular but crucial value investing metric, price/earnings to growth (PEG) ratio.
While searching for a suitable value investment option, investors are unlikely to consider this ratio among a number of other popular value metrics like price/earnings (P/E), price/sales (P/S) or price/book value (P/B). This is because they often find this ratio complicated, considering the limitations in calculating the future earnings growth potential of a stock.
The PEG ratio is defined as (Price/ Earnings)/Earnings Growth Rate
A low PEG ratio is always better for value investors.
While P/E alone fails to identify a true value stock, PEG helps to find the intrinsic value of a stock.
There are some drawbacks to using the PEG ratio though. It does not consider the very common situation of changing growth rates such as the forecast of the first three years at a very high growth rate followed by a sustainable but lower growth rate in the long term.
Hence, PEG-based investing can turn out to be even more rewarding if some other relevant parameters are also taken into consideration.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1799696/6-value-stocks-based-on-peg-to-bet-on-amid-market-crash?art_rec=quote-stock_overview-zacks_news-ID01-txt-1799696 Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. About Screen of the Week
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