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Are Investors Undervaluing Xerox (XRX) Right Now?

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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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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 Xerox (XRX - Free Report) . XRX is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 6.78 right now. For comparison, its industry sports an average P/E of 13.57. Over the past 52 weeks, XRX's Forward P/E has been as high as 10.32 and as low as 6.73, with a median of 8.23.

Another notable valuation metric for XRX is its P/B ratio of 1.24. 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 solid versus its industry's average P/B of 1.95. Within the past 52 weeks, XRX's P/B has been as high as 1.64 and as low as 1.10, with a median of 1.32.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. XRX has a P/S ratio of 0.61. This compares to its industry's average P/S of 0.8.

Value investors will likely look at more than just these metrics, but the above data helps show that Xerox is likely undervalued currently. And when considering the strength of its earnings outlook, XRX sticks out at as one of the market's strongest value stocks.




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