Back to top

Image: Bigstock

Is Ally Financial (ALLY) Stock Undervalued Right Now?

Read MoreHide Full Article

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.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One stock to keep an eye on is Ally Financial (ALLY - Free Report) . ALLY is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 6.60, while its industry has an average P/E of 8.25. ALLY's Forward P/E has been as high as 8.73 and as low as 6.59, with a median of 7.67, all within the past year.

We also note that ALLY holds a PEG ratio of 0.41. 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. ALLY's PEG compares to its industry's average PEG of 0.72. Within the past year, ALLY's PEG has been as high as 0.66 and as low as 0.41, with a median of 0.58.

Another valuation metric that we should highlight is ALLY's P/B ratio of 0.75. The P/B is a method of comparing a stock's market value to 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 0.90. Within the past 52 weeks, ALLY's P/B has been as high as 0.96 and as low as 0.75, with a median of 0.85.

Finally, investors should note that ALLY has a P/CF ratio of 3.39. 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. ALLY's P/CF compares to its industry's average P/CF of 5.05. Within the past 12 months, ALLY's P/CF has been as high as 4.44 and as low as 3.37, with a median of 3.94.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Ally Financial is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ALLY feels like a great value stock at the moment.

In-Depth Zacks Research for the Tickers Above

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

Ally Financial Inc. (ALLY) - free report >>

Published in