At a time when volatility strikes every second day, investors often rely on value investing rather than other options like growth or momentum. As soon as other investors start selling their stocks at a cheaper rate in times of market uncertainty, these value investors take this as an opportunity to pick good stocks at a discounted price.

Several stocks that have surged significantly in the recent past have shown the overwhelming success of this pure-play investment strategy. Here, we discuss four such stocks — Barrick Gold (GOLD Quick QuoteGOLD - Free Report) , StoneCo (STNE Quick QuoteSTNE - Free Report) , Synovus Financial (SNV Quick QuoteSNV - Free Report) and BGC Group, Inc. (BGC Quick QuoteBGC - Free Report) .

However, this apparently simple value investment technique has some drawbacks and not understanding the strategy properly may often lead to “value traps.” In such a situation, these value picks start to underperform over the long run as the temporary problems, which once drove the share price down, turn out to be persistent.

There are many value investment yardsticks such as dividend yield, P/E or P/B, which are simple and can single out whether a stock is trading at a discount.

However, for investors looking to escape such value traps, it is also vital to determine where the stock would be headed in the next 12 to 24 months. Warren Buffett advises these investors to focus on the earnings growth potential of a stock. This is where lies the importance of a not-so-popular value investing metric, the PEG ratio.

PEG Ratio at a Glance

The PEG ratio is defined as (Price/ Earnings)/Earnings Growth Rate

A low PEG ratio is always better for value investors.

While P/E alone fails to identify a true value stock, PEG helps find the intrinsic value of a stock.

There are some drawbacks to using the PEG ratio. It doesn’t consider the very common situation of changing growth rates, such as the forecast of the first three years at a very high growth rate, followed by a sustainable but lower growth rate over the long term.

Hence, PEG-based investing can turn out to be even more rewarding if some other relevant parameters are also taken into consideration.

Here are some of the screening criteria for a winning strategy:

PEG Ratio less than X Industry Median

P/E Ratio (using F1) less than X Industry Median (for more accurate valuation purposes)

Zacks Rank #1 (Strong Buy) or 2 (Buy) (Whether good market conditions or bad, stocks with a Zacks Rank #1 or 2 have a proven history of success.)

Market Capitalization greater than $1 billion (This helps us to focus on companies that have strong liquidity.)

Average 20-Day Volume greater than 50,000 (A substantial trading volume ensures that the stock is easily tradable.)

Percentage Change F1 Earnings Estimate Revisions (4 Weeks) greater than 5% (Upward estimate revisions add to the optimism, suggesting further bullishness.)

Value Score of less than or equal to B: Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1, 2 or 3 (Hold), offer the best upside potential. 

Our PEG-Driven Picks

Here are four stocks that qualified the screening:

Barrick Gold: The company, based in Toronto, Canada, is one of the largest gold mining companies in the world. It has many advanced exploration and development projects located across five continents. Barrick Gold produced 3.9 million ounces of gold and 195,000 tons of copper in 2024. Barrick Gold had 89 million ounces (oz) of proven and probable gold reserves at the end of 2024.

Barrick Gold currently has a Zacks Rank #2 and a Value Score of A. GOLD also has an impressive five-year expected growth rate of 33.5%.

StoneCo: The company provides financial technology and software solutions to merchants and integrated partners to conduct electronic commerce across in-store, online, and mobile channels in Brazil. The company offers financial services, including payment, prepayment, digital banking, and credit solutions.

Apart from a discounted PEG and P/E, StoneCo currently has a Zacks Rank #1 and a Value Score of B. StoneCo has a long-term expected growth rate of 26.3%.

Synovus Financial: Columbus, GA-based Synovus Financial is a diverse financial services company that conducts its banking operations through Synovus Bank. It provides integrated financial services, including commercial and consumer banking, investment, and mortgage services, to its customers through locally branded divisions of its wholly-owned subsidiary, Synovus Bank, which has 246 branches in Alabama, Florida, Georgia, South Carolina, and Tennessee.

Synovus Financial has a Zacks Rank #2 and a Value Score of A. SNV also has an impressive five-year expected growth rate of 10.2%.

BGC: The company operates as a financial brokerage and technology company in the United States, Europe, the Middle East, Africa, and the Asia Pacific. The company offers various brokerage products. These include fixed-income products like government bonds, corporate bonds, and other debt instruments, as well as related interest rate derivatives and credit derivatives.

BGC has an impressive long-term expected earnings growth rate of 24.7%. BGC currently has a Value Score of B and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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.

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.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report