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Add Value to Your Investments with These 4 Low P/CF Stocks
The market is trying to cope with geopolitical tension, thanks to the Russia and Ukraine conflict, supply chain bottlenecks, and soaring inflation. Well, the rising crude prices on concerns about supplies from Russia, which is one of the world's largest producers of the commodity, is a worrying factor. The Biden administration's ban on the import of Russian crude and energy products has contributed to oil's rapid price surge.
Meanwhile, the Federal Reserve raised the benchmark interest rate by 25 basis points in order to tame shooting commodity prices. The policymakers have kept interest rate near zero since the pandemic struck the economy. But now the Fed chief Jerome Powell has signaled an aggressive stance on rate hikes to rein in current price increases. The current scenario calls for a prudent investment strategy, as it will be difficult to generate the kind of return registered last year.
Investors always try to hit the jackpot while picking stocks. But striking the right chord each time is not easy unless you are blessed with Midas touch. When it comes to the investment market, experts consider value style as one of the most effective approaches. Value investing is essentially about selecting stocks that have good things going for them at a time when they have been beaten down by some external factor.
There are different valuation metrics to determine a stock's inherent strength but a random selection of ratios cannot serve your purpose if you want a realistic assessment of a company's financial position. For this, we recommend Price to Cash Flow (or P/CF) as one of the key metrics.
This metric evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per share basis – the lower the number, the better. Celestica Inc., Target Corp., TotalEnergies SE and Signet Jewelers Ltd. boast a low P/CF ratio.
Price to Cash Flow Reveals Financial Health
Questions may arise as to why we are considering the Price to Cash Flow valuation metric, when the most widely used metric is Price/Earnings (or P/E). Well, what makes P/CF stand out is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly reflecting the financial health of a company.
Analysts caution that a company's earnings are subject to accounting estimates and management manipulation. However, cash flow is reliable. It is net cash flow that reveals how much money a company is actually generating and how effectively management is putting the same to use.
A positive cash flow indicates an increase in the company's liquid assets. This gives the company the means to settle debt, shell out for its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. Then again, a negative cash flow implies a decline in the company's liquidity, which in turn lowers its flexibility to support these moves.
What's the Best Strategy?
An investment decision solely based on the P/CF metric may not fetch the desired results. To identify stocks that are trading at a discount, you should expand your search criteria and also consider price-to-book ratio, price-to-earnings ratio and price-to-sales ratio. Adding a favorable Zacks Rank and a Value Score of A or B to your search criteria should lead to even better results as these eliminate the chance of falling into a value trap.
Here are four of the 21 stocks that qualified the screening:
Celestica, a leader in design, manufacturing and supply-chain solutions for the world's most innovative companies, sports a Zacks Rank #1. It has an expected EPS growth rate of 14.5% for three-five years. The company has a trailing four-quarter earnings surprise of 10.9%, on average. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Celestica's current financial-year sales and EPS suggests growth of 12.6% and 23.9%, respectively, from the year-ago period. CLS has a Value Score of A. The stock has zoomed 47.5% in the past year.
Target, a general merchandise retailer in the United States, carries a Zacks Rank #1 and has an expected EPS growth rate of 16.5% for three-five years. The company has a trailing four-quarter positive earnings surprise of 21.3%, on average.
The Zacks Consensus Estimate for Target's current financial year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the year-ago period. Target has a Value Score of B. Shares of TGT have gained 8% in the past year.
TotalEnergies, which operates as an integrated oil and gas company globally, sports a Zacks Rank #1 and has an expected EPS growth rate of 6.6% for three-five years. The company has a trailing four-quarter positive earnings surprise of 18.9%, on average.
The Zacks Consensus Estimate for TotalEnergies' current financial year EPS suggests growth of 31.1% from the year-ago period. TotalEnergies has a Value Score of A. Shares of TTE have gained 10.5% in the past year.
Signet, the world's largest retailer of diamond jewelry, carries a Zacks Rank #2. It has an expected EPS growth rate of 8% for three-five years. The company has a trailing four-quarter earnings surprise of 73.8%, on average.
The Zacks Consensus Estimate for Signet's current financial year sales suggests growth of 5.2% from the year-ago period. SIG has a Value Score of A. The stock has risen 34.4% in the past year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
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Zacks.com featured highlights include Celestica, Target, TotalEnergies SE and Signet Jewelers
For Immediate Release
Chicago, IL – March 28, 2022 – Stocks in this week’s article are Celestica Inc. (CLS - Free Report) , Target Corp. (TGT - Free Report) , TotalEnergies SE (TTE - Free Report) and Signet Jewelers Ltd. (SIG - Free Report) .
Add Value to Your Investments with These 4 Low P/CF Stocks
The market is trying to cope with geopolitical tension, thanks to the Russia and Ukraine conflict, supply chain bottlenecks, and soaring inflation. Well, the rising crude prices on concerns about supplies from Russia, which is one of the world's largest producers of the commodity, is a worrying factor. The Biden administration's ban on the import of Russian crude and energy products has contributed to oil's rapid price surge.
Meanwhile, the Federal Reserve raised the benchmark interest rate by 25 basis points in order to tame shooting commodity prices. The policymakers have kept interest rate near zero since the pandemic struck the economy. But now the Fed chief Jerome Powell has signaled an aggressive stance on rate hikes to rein in current price increases. The current scenario calls for a prudent investment strategy, as it will be difficult to generate the kind of return registered last year.
Investors always try to hit the jackpot while picking stocks. But striking the right chord each time is not easy unless you are blessed with Midas touch. When it comes to the investment market, experts consider value style as one of the most effective approaches. Value investing is essentially about selecting stocks that have good things going for them at a time when they have been beaten down by some external factor.
There are different valuation metrics to determine a stock's inherent strength but a random selection of ratios cannot serve your purpose if you want a realistic assessment of a company's financial position. For this, we recommend Price to Cash Flow (or P/CF) as one of the key metrics.
This metric evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per share basis – the lower the number, the better. Celestica Inc., Target Corp., TotalEnergies SE and Signet Jewelers Ltd. boast a low P/CF ratio.
Price to Cash Flow Reveals Financial Health
Questions may arise as to why we are considering the Price to Cash Flow valuation metric, when the most widely used metric is Price/Earnings (or P/E). Well, what makes P/CF stand out is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly reflecting the financial health of a company.
Analysts caution that a company's earnings are subject to accounting estimates and management manipulation. However, cash flow is reliable. It is net cash flow that reveals how much money a company is actually generating and how effectively management is putting the same to use.
A positive cash flow indicates an increase in the company's liquid assets. This gives the company the means to settle debt, shell out for its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. Then again, a negative cash flow implies a decline in the company's liquidity, which in turn lowers its flexibility to support these moves.
What's the Best Strategy?
An investment decision solely based on the P/CF metric may not fetch the desired results. To identify stocks that are trading at a discount, you should expand your search criteria and also consider price-to-book ratio, price-to-earnings ratio and price-to-sales ratio. Adding a favorable Zacks Rank and a Value Score of A or B to your search criteria should lead to even better results as these eliminate the chance of falling into a value trap.
Here are four of the 21 stocks that qualified the screening:
Celestica, a leader in design, manufacturing and supply-chain solutions for the world's most innovative companies, sports a Zacks Rank #1. It has an expected EPS growth rate of 14.5% for three-five years. The company has a trailing four-quarter earnings surprise of 10.9%, on average. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Celestica's current financial-year sales and EPS suggests growth of 12.6% and 23.9%, respectively, from the year-ago period. CLS has a Value Score of A. The stock has zoomed 47.5% in the past year.
Target, a general merchandise retailer in the United States, carries a Zacks Rank #1 and has an expected EPS growth rate of 16.5% for three-five years. The company has a trailing four-quarter positive earnings surprise of 21.3%, on average.
The Zacks Consensus Estimate for Target's current financial year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the year-ago period. Target has a Value Score of B. Shares of TGT have gained 8% in the past year.
TotalEnergies, which operates as an integrated oil and gas company globally, sports a Zacks Rank #1 and has an expected EPS growth rate of 6.6% for three-five years. The company has a trailing four-quarter positive earnings surprise of 18.9%, on average.
The Zacks Consensus Estimate for TotalEnergies' current financial year EPS suggests growth of 31.1% from the year-ago period. TotalEnergies has a Value Score of A. Shares of TTE have gained 10.5% in the past year.
Signet, the world's largest retailer of diamond jewelry, carries a Zacks Rank #2. It has an expected EPS growth rate of 8% for three-five years. The company has a trailing four-quarter earnings surprise of 73.8%, on average.
The Zacks Consensus Estimate for Signet's current financial year sales suggests growth of 5.2% from the year-ago period. SIG has a Value Score of A. The stock has risen 34.4% in the past year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1887362/add-value-to-your-investment-with-these-4-low-pcf-stocks
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
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: https://www.zacks.com/
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.