Back to top

Image: Bigstock

Should Value Investors Buy Lloyds Banking Group (LYG) Stock?

Read MoreHide Full Article

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

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 use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 company value investors might notice is Lloyds Banking Group (LYG - Free Report) . LYG is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 7.95. This compares to its industry's average Forward P/E of 9.58. LYG's Forward P/E has been as high as 10.78 and as low as 6.08, with a median of 7.90, all within the past year.

Investors should also note that LYG holds a PEG ratio of 0.26. 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. LYG's PEG compares to its industry's average PEG of 0.49. Over the last 12 months, LYG's PEG has been as high as 0.39 and as low as 0.20, with a median of 0.25.

Another valuation metric that we should highlight is LYG's P/B ratio of 0.64. 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 1.40. LYG's P/B has been as high as 0.73 and as low as 0.56, with a median of 0.63, over the past year.

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. LYG has a P/S ratio of 1.47. This compares to its industry's average P/S of 1.63.

These are only a few of the key metrics included in Lloyds Banking Group's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, LYG looks 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:

Lloyds Banking Group PLC (LYG) - free report >>

Published in