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.
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 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 stock to keep an eye on is PennyMac Financial (PFSI - Free Report) . PFSI is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock is trading with a P/E ratio of 7.35, which compares to its industry's average of 8.41. Over the past 52 weeks, PFSI's Forward P/E has been as high as 8.53 and as low as 6.56, with a median of 7.58.
Investors will also notice that PFSI has a PEG ratio of 0.74. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PFSI's industry has an average PEG of 0.98 right now. Over the past 52 weeks, PFSI's PEG has been as high as 0.85 and as low as 0.66, with a median of 0.76.
Another valuation metric that we should highlight is PFSI's P/B ratio of 1.39. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 2.26. Within the past 52 weeks, PFSI's P/B has been as high as 1.39 and as low as 0.26, with a median of 1.05.
Finally, we should also recognize that PFSI has a P/CF ratio of 3.35. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. PFSI's P/CF compares to its industry's average P/CF of 11.82. Within the past 12 months, PFSI's P/CF has been as high as 5.70 and as low as 2.96, with a median of 4.08.
Value investors will likely look at more than just these metrics, but the above data helps show that PennyMac Financial is likely undervalued currently. And when considering the strength of its earnings outlook, PFSI sticks out at as one of the market's strongest value stocks.