Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
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 Builders FirstSource (BLDR - Free Report) . BLDR is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock holds a P/E ratio of 11.79, while its industry has an average P/E of 20.44. BLDR's Forward P/E has been as high as 11.79 and as low as 5.62, with a median of 8.41, 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. BLDR has a P/S ratio of 0.35. This compares to its industry's average P/S of 0.46.
Finally, investors will want to recognize that BLDR has a P/CF ratio of 8.11. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 14.86. Within the past 12 months, BLDR's P/CF has been as high as 8.11 and as low as 4.13, with a median of 5.96.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Builders FirstSource is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, BLDR feels like a great value stock at the moment.