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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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.
Jazz Pharmaceuticals (JAZZ - Free Report) is a stock many investors are watching right now. JAZZ is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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. JAZZ has a P/S ratio of 3.68. This compares to its industry's average P/S of 5.97.
Finally, investors should note that JAZZ has a P/CF ratio of 8. 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. JAZZ's P/CF compares to its industry's average P/CF of 16.82. Over the past year, JAZZ's P/CF has been as high as 14.83 and as low as 7.75, with a median of 10.77.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Jazz Pharmaceuticals is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, JAZZ feels like a great value stock at the moment.