While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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 DXC Technology (DXC - Free Report) . DXC is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 7.19. This compares to its industry's average Forward P/E of 18.01. Over the last 12 months, DXC's Forward P/E has been as high as 12.97 and as low as 5.66, with a median of 10.22.
DXC is also sporting a PEG ratio of 1.09. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DXC's PEG compares to its industry's average PEG of 1.64. Over the last 12 months, DXC's PEG has been as high as 1.54 and as low as 0.90, with a median of 1.10.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. DXC has a P/S ratio of 0.79. This compares to its industry's average P/S of 2.08.
Value investors will likely look at more than just these metrics, but the above data helps show that DXC Technology is likely undervalued currently. And when considering the strength of its earnings outlook, DXC sticks out at as one of the market's strongest value stocks.