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Is United Continental (UAL) 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.

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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

United Continental (UAL - Free Report) is a stock many investors are watching right now. UAL is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 7.77 right now. For comparison, its industry sports an average P/E of 9.22. Over the past 52 weeks, UAL's Forward P/E has been as high as 9.80 and as low as 6.72, with a median of 8.06.

We also note that UAL holds a PEG ratio of 0.37. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. UAL's industry currently sports an average PEG of 0.40. UAL's PEG has been as high as 0.47 and as low as 0.32, with a median of 0.39, all within the past year.

We should also highlight that UAL has a P/B ratio of 2.43. The P/B ratio pits a stock's market value against 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 2.91. Over the past year, UAL's P/B has been as high as 2.85 and as low as 2.08, with a median of 2.39.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. UAL has a P/S ratio of 0.56. This compares to its industry's average P/S of 0.65.

Finally, our model also underscores that UAL has a P/CF ratio of 5.39. 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. This stock's P/CF looks attractive against its industry's average P/CF of 6.45. Over the past year, UAL's P/CF has been as high as 6.02 and as low as 4.52, with a median of 5.28.

These are only a few of the key metrics included in United Continental'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, UAL looks like an impressive value stock at the moment.


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