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Should Value Investors Buy Prospect Capital (PSEC) Stock?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Prospect Capital (PSEC - Free Report) is a stock many investors are watching right now. PSEC is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 8.41 right now. For comparison, its industry sports an average P/E of 11.80. Over the past year, PSEC's Forward P/E has been as high as 10.09 and as low as 7.22, with a median of 9.

Investors should also recognize that PSEC has a P/B ratio of 0.77. The P/B ratio pits a stock's market value against 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 1.93. PSEC's P/B has been as high as 0.81 and as low as 0.61, with a median of 0.73, over the past year.

Finally, investors should note that PSEC has a P/CF ratio of 7.70. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 14.83. Over the past year, PSEC's P/CF has been as high as 10.62 and as low as 7.17, with a median of 8.06.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Prospect Capital is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, PSEC feels like a great value stock at the moment.




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