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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company value investors might notice is PRA Group (PRAA - Free Report) . PRAA is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock holds a P/E ratio of 6.50, while its industry has an average P/E of 10.50. Over the past year, PRAA's Forward P/E has been as high as 20.60 and as low as 6.50, with a median of 14.80.
Another valuation metric that we should highlight is PRAA's P/B ratio of 0.74. Investors use the P/B ratio to look at a stock's market value versus 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 1.93. Within the past 52 weeks, PRAA's P/B has been as high as 1.50 and as low as 0.74, with a median of 1.31.
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. PRAA has a P/S ratio of 1.03. This compares to its industry's average P/S of 1.04.
Value investors will likely look at more than just these metrics, but the above data helps show that PRA Group is likely undervalued currently. And when considering the strength of its earnings outlook, PRAA sticks out at as one of the market's strongest value stocks.