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Are Investors Undervaluing These Finance Stocks Right Now?

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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.

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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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 stock to keep an eye on is First United (FUNC - Free Report) . FUNC is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 7.06, which compares to its industry's average of 13.17. Over the past year, FUNC's Forward P/E has been as high as 7.86 and as low as 6.50, with a median of 7.18.

We should also highlight that FUNC has a P/B ratio of 0.98. 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 solid versus its industry's average P/B of 1.75. Over the past year, FUNC's P/B has been as high as 1.07 and as low as 0.79, with a median of 0.92.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. FUNC has a P/S ratio of 1.77. This compares to its industry's average P/S of 3.

Finally, we should also recognize that FUNC has a P/CF ratio of 7.50. 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. FUNC's current P/CF looks attractive when compared to its industry's average P/CF of 17.85. Over the past year, FUNC's P/CF has been as high as 8.94 and as low as 5.80, with a median of 7.38.

Investors could also keep in mind Limestone Bancorp , an Banks - Northeast stock with a Zacks Rank of # 2 (Buy) and Value grade of A.

Limestone Bancorp sports a P/B ratio of 0.97 as well; this compares to its industry's price-to-book ratio of 1.75. In the past 52 weeks, LMST's P/B has been as high as 1.02, as low as 0.68, with a median of 0.88.

These figures are just a handful of the metrics value investors tend to look at, but they help show that First United and Limestone Bancorp are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, FUNC and LMST feels like a great value stock at the moment.


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