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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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.
One company to watch right now is Approach Resources (AREX - Free Report) . AREX is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.
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. AREX has a P/S ratio of 1.02. This compares to its industry's average P/S of 1.91.
Finally, our model also underscores that AREX has a P/CF ratio of 1.38. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 4.74. AREX's P/CF has been as high as 3.27 and as low as -8.64, with a median of 2.21, all within the past year.
These are only a few of the key metrics included in Approach Resources's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, AREX looks like an impressive value stock at the moment.