Back to top

Image: Bigstock

Should Value Investors Buy These Finance Stocks?

Read MoreHide Full Article

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.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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 HomeStreet (HMST - Free Report) . HMST is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 10.83, which compares to its industry's average of 12.45. Over the last 12 months, HMST's Forward P/E has been as high as 12.44 and as low as 8.43, with a median of 10.04.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. HMST has a P/S ratio of 2.71. This compares to its industry's average P/S of 2.95.

Finally, we should also recognize that HMST has a P/CF ratio of 8.99. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. HMST's P/CF compares to its industry's average P/CF of 11.44. Over the past 52 weeks, HMST's P/CF has been as high as 10.36 and as low as 6.33, with a median of 7.72.

If you're looking for another solid Financial - Savings and Loan value stock, take a look at Waterstone Financial (WSBF - Free Report) . WSBF is a # 2 (Buy) stock with a Value score of A.

Furthermore, Waterstone Financial holds a P/B ratio of 1.19 and its industry's price-to-book ratio is 1.09. WSBF's P/B has been as high as 1.28, as low as 1.11, with a median of 1.17 over the past 12 months.

Value investors will likely look at more than just these metrics, but the above data helps show that HomeStreet and Waterstone Financial are likely undervalued currently. And when considering the strength of its earnings outlook, HMST and WSBF sticks out as one of the market's strongest value stocks.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


HomeStreet, Inc. (HMST) - free report >>

Waterstone Financial, Inc. (WSBF) - free report >>

Published in