Back to top

Image: Bigstock

Should Value Investors Buy These Basic Materials 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.

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.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is AngloGold Ashanti (AU - Free Report) . AU is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 7.50, while its industry has an average P/E of 14.72. Over the last 12 months, AU's Forward P/E has been as high as 11.91 and as low as 6.36, with a median of 8.46.

We also note that AU holds a PEG ratio of 1.28. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AU's PEG compares to its industry's average PEG of 1.91. Within the past year, AU's PEG has been as high as 2.67 and as low as 0.25, with a median of 1.80.

Another great Mining - Gold stock you could consider is Harmony Gold (HMY - Free Report) , which is a # 2 (Buy) stock with a Value Score of A.

Harmony Gold is trading at a forward earnings multiple of 6.47 at the moment, with a PEG ratio of 0.55. This compares to its industry's average P/E of 14.72 and average PEG ratio of 1.91.

Over the last 12 months, HMY's P/E has been as high as 11.81, as low as 3.66, with a median of 7.33, and its PEG ratio has been as high as 1, as low as 0.37, with a median of 0.56.

Additionally, Harmony Gold has a P/B ratio of 1.12 while its industry's price-to-book ratio sits at 1.16. For HMY, this valuation metric has been as high as 1.73, as low as 0.91, with a median of 1.18 over the past year.

These are only a few of the key metrics included in AngloGold Ashanti and Harmony Gold strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, AU and HMY look like an impressive value stock at the moment.

In-Depth Zacks Research for the Tickers Above

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

AngloGold Ashanti Limited (AU) - free report >>

Harmony Gold Mining Company Limited (HMY) - free report >>

Published in