Back to top

Image: Bigstock

Should Value Investors Buy Danaos (DAC) Stock?

Read MoreHide Full Article

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.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 Danaos (DAC - Free Report) . DAC is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock holds a P/E ratio of 2.01, while its industry has an average P/E of 4.46. Over the past 52 weeks, DAC's Forward P/E has been as high as 4.63 and as low as 1.90, with a median of 2.98.

We should also highlight that DAC has a P/B ratio of 0.50. The P/B ratio is used to compare a stock's market value with 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 1.16. Over the past 12 months, DAC's P/B has been as high as 1.06 and as low as 0.47, with a median of 0.73.

Finally, our model also underscores that DAC has a P/CF ratio of 1.44. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. DAC's P/CF compares to its industry's average P/CF of 3.04. DAC's P/CF has been as high as 1.95 and as low as 1.07, with a median of 1.47, all within the past year.

Investors could also keep in mind Orient Overseas International (OROVY - Free Report) , an Transportation - Shipping stock with a Zacks Rank of # 2 (Buy) and Value grade of A.

Orient Overseas International sports a P/B ratio of 0.84 as well; this compares to its industry's price-to-book ratio of 1.16. In the past 52 weeks, OROVY's P/B has been as high as 2.46, as low as 0.81, with a median of 1.70.

Value investors will likely look at more than just these metrics, but the above data helps show that Danaos and Orient Overseas International are likely undervalued currently. And when considering the strength of its earnings outlook, DAC and OROVY 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:

Danaos Corporation (DAC) - free report >>

Orient Overseas International Ltd. (OROVY) - free report >>

Published in