Many investors like to look for value in stocks, but this can be very tough to define. There is great debate regarding which metrics are the best to focus on in this regard, and which are not really quality indicators of future performance. Fortunately, with our new style score system we have identified the key statistics to pay close attention to and thus which stocks might be the best for value investors in the near term.
This method discovered several great candidates for value-oriented investors, but today let’s focus on Extreme Networks Inc. (EXTR - Snapshot Report) as this stock is looking especially impressive right now. And while there are numerous reasons why this is the case, we have highlighted three of the most vital reasons for EXTR’s status as a solid value stock below:
PEG Ratio for EXTR
While earnings are definitely important, it is vital to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio as this metric looks to show investors how much they are paying for each unit of earnings growth.
EXTR manages to impress on this front as well, as the company’s PEG is just 1.22, suggesting that Extreme Networksis trading as a relative bargain right now. This is particularly the case when you compare this PEG to the industry, as the broader segment has an average PEG of 1.74 in comparison.
Price to Forward Sales for Extreme Networks
One of the most underrated ratios for value investors is the price/forward sales metric. This ratio shows investors how much they are paying for each dollar of revenues generated. In other words, a lower number is better here while a price to sales ratio of 1 means that you are paying one dollar for each dollar in sales.
EXTREME NETWRKS PE Ratio (TTM)
With a P/S ratio of 0.77, EXTR investors are paying 77 cents in stock price for each dollar of revenue generated by the company. Compare this to the industry average of 1.7, and it is safe to say that EXTR is undervalued compared to many of its peers on this important metric.
EXTR Earnings Estimate Revisions Moving in the Right Direction
The solid value ratios outlined in the preceding paragraphs might be enough for some investors, but we should also note that the earnings estimate revisions have been trending in a positive direction as well. Analysts who follow EXTR stock have been raising their estimates for the company lately, meaning that the EPS picture is looking a bit more favorably for Extreme Networks now.
Over the past 30 days, 1 earnings estimates have gone higher compared to none lower for the full year, while we are also seeing that 1 estimate has move upwards with no downward revision for the next year time frame too. These revisions have helped to boost the consensus estimate as 30 days ago EXTR was expected to post earnings of 19 cents per share for the full year though today it looks to have EPS of 20 cents for the full year.
For the reasons detailed above, investors shouldn’t be surprised to read that we have EXTR as a stock with a Value Score of ‘A’ and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
So if you are a value investor, definitely keep EXTR on your short list as this looks to be a stock that is very well-positioned for gains in the near term.
Confidential from Zacks
Beyond this Tale of the Tape, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>