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Should Value Investors Buy Covenant Transportation (CVTI) Stock?

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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 company value investors might notice is Covenant Transportation (CVTI - Free Report) . CVTI is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 7.25, while its industry has an average P/E of 12.24. Over the past year, CVTI's Forward P/E has been as high as 31.88 and as low as 7.11, with a median of 14.78.

We should also highlight that CVTI has a P/B ratio of 1.07. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. CVTI's current P/B looks attractive when compared to its industry's average P/B of 2. CVTI's P/B has been as high as 2.17 and as low as 1.05, with a median of 1.75, over the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. CVTI has a P/S ratio of 0.42. This compares to its industry's average P/S of 0.8.

Finally, investors will want to recognize that CVTI has a P/CF ratio of 2.36. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. CVTI's current P/CF looks attractive when compared to its industry's average P/CF of 6.72. Over the past 52 weeks, CVTI's P/CF has been as high as 6.19 and as low as 2.31, with a median of 3.97.

These are only a few of the key metrics included in Covenant Transportation'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, CVTI looks like an impressive value stock at the moment.

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