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Are Investors Undervaluing CarMax (KMX) Right Now?
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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 use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
One company value investors might notice is CarMax (KMX - Free Report) . KMX is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 15.95 right now. For comparison, its industry sports an average P/E of 18.39. Over the past year, KMX's Forward P/E has been as high as 16.71 and as low as 11.39, with a median of 14.39.
KMX is also sporting a PEG ratio of 1.27. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. KMX's industry currently sports an average PEG of 1.42. Over the last 12 months, KMX's PEG has been as high as 1.35 and as low as 0.77, with a median of 1.05.
Another valuation metric that we should highlight is KMX's P/B ratio of 4.17. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 11.44. Over the past year, KMX's P/B has been as high as 4.28 and as low as 2.88, with a median of 3.65.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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. KMX has a P/S ratio of 0.75. This compares to its industry's average P/S of 1.17.
Finally, investors will want to recognize that KMX has a P/CF ratio of 13.71. 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. This stock's P/CF looks attractive against its industry's average P/CF of 24.40. KMX's P/CF has been as high as 15.98 and as low as 9.71, with a median of 12.84, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that CarMax is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, KMX feels like a great value stock at the moment.
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Are Investors Undervaluing CarMax (KMX) Right Now?
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 use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
One company value investors might notice is CarMax (KMX - Free Report) . KMX is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 15.95 right now. For comparison, its industry sports an average P/E of 18.39. Over the past year, KMX's Forward P/E has been as high as 16.71 and as low as 11.39, with a median of 14.39.
KMX is also sporting a PEG ratio of 1.27. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. KMX's industry currently sports an average PEG of 1.42. Over the last 12 months, KMX's PEG has been as high as 1.35 and as low as 0.77, with a median of 1.05.
Another valuation metric that we should highlight is KMX's P/B ratio of 4.17. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 11.44. Over the past year, KMX's P/B has been as high as 4.28 and as low as 2.88, with a median of 3.65.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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. KMX has a P/S ratio of 0.75. This compares to its industry's average P/S of 1.17.
Finally, investors will want to recognize that KMX has a P/CF ratio of 13.71. 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. This stock's P/CF looks attractive against its industry's average P/CF of 24.40. KMX's P/CF has been as high as 15.98 and as low as 9.71, with a median of 12.84, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that CarMax is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, KMX feels like a great value stock at the moment.