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Are Investors Undervaluing Armour Residential REIT (ARR) 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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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.

Armour Residential REIT (ARR - Free Report) is a stock many investors are watching right now. ARR is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 5.20 right now. For comparison, its industry sports an average P/E of 10.07. ARR's Forward P/E has been as high as 9.73 and as low as 5.20, with a median of 7.73, all within the past year.

Another valuation metric that we should highlight is ARR's P/B ratio of 0.48. 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. Within the past 52 weeks, ARR's P/B has been as high as 0.87 and as low as 0.48, with a median of 0.74.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ARR has a P/S ratio of 1.83. This compares to its industry's average P/S of 1.95.

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


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