The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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.
Momo Inc. (MOMO - Free Report) is a stock many investors are watching right now. MOMO is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A.
Another valuation metric that we should highlight is MOMO's P/B ratio of 3.60. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 8.03. MOMO's P/B has been as high as 8.89 and as low as 2.95, with a median of 4.74, over the past year.
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. MOMO has a P/S ratio of 2.74. This compares to its industry's average P/S of 3.61.
Finally, investors will want to recognize that MOMO has a P/CF ratio of 14.59. 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. MOMO's P/CF compares to its industry's average P/CF of 30.33. Over the past year, MOMO's P/CF has been as high as 29.20 and as low as 11.34, with a median of 18.56.
Value investors will likely look at more than just these metrics, but the above data helps show that Momo Inc. Is likely undervalued currently. And when considering the strength of its earnings outlook, MOMO sticks out at as one of the market's strongest value stocks.