Back to top

Image: Bigstock

Is Macy's (M) a Great Value Stock Right Now?

Read MoreHide Full Article

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.

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 to watch right now is Macy's (M). M is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 6.85 right now. For comparison, its industry sports an average P/E of 11.26. Over the last 12 months, M's Forward P/E has been as high as 8.42 and as low as 5.30, with a median of 7.04.

Investors should also note that M holds a PEG ratio of 0.91. 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. M's industry currently sports an average PEG of 1.35. M's PEG has been as high as 1.04 and as low as 0.71, with a median of 0.90, all within the past year.

Another notable valuation metric for M is its P/B ratio of 0.84. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. M's current P/B looks attractive when compared to its industry's average P/B of 1.30. M's P/B has been as high as 1.24 and as low as 0.70, with a median of 0.99, over the past year.

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 0.2. 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 2.65. 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 4.25. Over the past 52 weeks, M's P/CF has been as high as 3.94 and as low as 2.25, with a median of 3.10.

Value investors will likely look at more than just these metrics, but the above data helps show that Macy's is likely undervalued currently. And when considering the strength of its earnings outlook, M sticks out at as one of the market's strongest value stocks.

Published in