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Is Dynex Capital (DX) Stock Undervalued Right Now?

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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 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 Dynex Capital (DX - Free Report) . DX is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 6.12, which compares to its industry's average of 10.07. Over the past 52 weeks, DX's Forward P/E has been as high as 10.41 and as low as 6.12, with a median of 8.55.

Another notable valuation metric for DX is its P/B ratio of 0.68. 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. This company's current P/B looks solid when compared to its industry's average P/B of 1.31. Over the past year, DX's P/B has been as high as 1.10 and as low as 0.68, with a median of 0.94.

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. DX has a P/S ratio of 1.64. This compares to its industry's average P/S of 2.29.

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


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