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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
One company to watch right now is Rent-A-Center (RCII - Free Report) . RCII 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 11.46 right now. For comparison, its industry sports an average P/E of 15.30. RCII's Forward P/E has been as high as 18.02 and as low as 9.32, with a median of 11.97, all within the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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 0.53. This compares to its industry's average P/S of 0.85.
Finally, our model also underscores that RCII has a P/CF ratio of 2.02. 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 6.22. Over the past 52 weeks, RCII's P/CF has been as high as 2.13 and as low as 0.98, with a median of 1.34.
These are just a handful of the figures considered in Rent-A-Center'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 RCII is an impressive value stock right now.