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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company value investors might notice is American Equity Investment (AEL - Free Report) . AEL is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 4.29. This compares to its industry's average Forward P/E of 9.22. Over the last 12 months, AEL's Forward P/E has been as high as 8.10 and as low as 2.34, with a median of 6.52.
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. AEL has a P/S ratio of 0.5. This compares to its industry's average P/S of 0.55.
These figures are just a handful of the metrics value investors tend to look at, but they help show that American Equity Investment is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AEL feels like a great value stock at the moment.