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 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 Yirendai . YRD is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. YRD has a P/S ratio of 1.13. This compares to its industry's average P/S of 2.29.
Finally, we should also recognize that YRD has a P/CF ratio of 5.96. 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 company's current P/CF looks solid when compared to its industry's average P/CF of 18.39. Within the past 12 months, YRD's P/CF has been as high as 11 and as low as 3.66, with a median of 5.83.
These are only a few of the key metrics included in Yirendai'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, YRD looks like an impressive value stock at the moment.