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.
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.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
Arch Coal (ARCH - Free Report) is a stock many investors are watching right now. ARCH is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 5.57. This compares to its industry's average Forward P/E of 8.34. Over the last 12 months, ARCH's Forward P/E has been as high as 9.97 and as low as 5.45, with a median of 7.13.
Another notable valuation metric for ARCH is its P/B ratio of 2.13. 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. ARCH's current P/B looks attractive when compared to its industry's average P/B of 3.91. Within the past 52 weeks, ARCH's P/B has been as high as 2.89 and as low as 2.08, with a median of 2.41.
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. ARCH has a P/S ratio of 0.61. This compares to its industry's average P/S of 1.38.
These are only a few of the key metrics included in Arch Coal'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, ARCH looks like an impressive value stock at the moment.