Back to top

Image: Bigstock

Should Value Investors Buy Ally Financial (ALLY) 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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 is trading with P/E ratio of 5.18 right now. For comparison, its industry sports an average P/E of 8.25. Over the past 52 weeks, ALLY's Forward P/E has been as high as 8.73 and as low as 4.87, with a median of 7.67.

ALLY is also sporting a PEG ratio of 0.32. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ALLY's industry has an average PEG of 0.72 right now. Over the past 52 weeks, ALLY's PEG has been as high as 0.66 and as low as 0.30, with a median of 0.58.

Another valuation metric that we should highlight is ALLY's P/B ratio of 0.59. 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 0.90. Within the past 52 weeks, ALLY's P/B has been as high as 0.96 and as low as 0.56, with a median of 0.85.

Finally, investors will want to recognize that ALLY has a P/CF ratio of 2.63. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid 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 2.47, with a median of 3.94.

These are only a few of the key metrics included in Ally Financial's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, ALLY looks like an impressive 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