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Is Rent-A-Center (RCII) Stock Undervalued Right Now?

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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.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. 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.

Rent-A-Center (RCII - Free Report) is a stock many investors are watching right now. RCII is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 10.42. This compares to its industry's average Forward P/E of 14.79. Over the last 12 months, RCII's Forward P/E has been as high as 36.83 and as low as 9.32, with a median of 12.32.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. RCII has a P/S ratio of 0.49. This compares to its industry's average P/S of 0.74.

Finally, we should also recognize that RCII has a P/CF ratio of 1.80. 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. RCII's current P/CF looks attractive when compared to its industry's average P/CF of 6.11. Within the past 12 months, RCII's P/CF has been as high as 2.02 and as low as 0.74, with a median of 1.14.

Value investors will likely look at more than just these metrics, but the above data helps show that Rent-A-Center is likely undervalued currently. And when considering the strength of its earnings outlook, RCII sticks out at as one of the market's strongest value stocks.


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