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.
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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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.
Allison Transmission (ALSN - Free Report) is a stock many investors are watching right now. ALSN is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 10.24, which compares to its industry's average of 11.77. Over the past year, ALSN's Forward P/E has been as high as 11.84 and as low as 8.35, with a median of 9.93.
Investors should also note that ALSN holds a PEG ratio of 1.02. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ALSN's industry has an average PEG of 1.27 right now. Within the past year, ALSN's PEG has been as high as 1.18 and as low as 0.83, with a median of 0.99.
Value investors will likely look at more than just these metrics, but the above data helps show that Allison Transmission is likely undervalued currently. And when considering the strength of its earnings outlook, ALSN sticks out at as one of the market's strongest value stocks.