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, 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.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
HP (HPQ - Free Report) is a stock many investors are watching right now. HPQ is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 9.02 right now. For comparison, its industry sports an average P/E of 15.24. HPQ's Forward P/E has been as high as 12.60 and as low as 8.40, with a median of 10.57, all within the past year.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. HPQ has a P/S ratio of 0.51. This compares to its industry's average P/S of 0.98.
Finally, our model also underscores that HPQ has a P/CF ratio of 6.73. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. HPQ's current P/CF looks attractive when compared to its industry's average P/CF of 10.92. Within the past 12 months, HPQ's P/CF has been as high as 8.52 and as low as 5.29, with a median of 6.78.
These are just a handful of the figures considered in HP's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that HPQ is an impressive value stock right now.