Back to top

Image: Bigstock

Should Value Investors Buy Macy's (M) Stock?

Read MoreHide Full Article

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 value investors might notice is Macy's (M - Free Report) . M is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 5.76. This compares to its industry's average Forward P/E of 10.12. M's Forward P/E has been as high as 10.41 and as low as 5.30, with a median of 7.51, all within the past year.

M is also sporting a PEG ratio of 0.77. 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. M's PEG compares to its industry's average PEG of 1.21. M's PEG has been as high as 1.22 and as low as 0.71, with a median of 0.92, all within the past year.

Investors should also recognize that M has a P/B ratio of 0.76. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.30. Over the past year, M's P/B has been as high as 2.06 and as low as 0.70, with a median of 1.13.

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. M has a P/S ratio of 0.19. This compares to its industry's average P/S of 0.23.

Finally, our model also underscores that M has a P/CF ratio of 2.43. 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 4.24. Over the past year, M's P/CF has been as high as 4.47 and as low as 2.25, with a median of 3.38.

These are just a handful of the figures considered in Macy's'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 M is an impressive value stock right now.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Macy's, Inc. (M) - free report >>

Published in