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.
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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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 to watch right now is Franklin Financial Network . FSB is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 7.44, which compares to its industry's average of 13. Over the past year, FSB's Forward P/E has been as high as 15.89 and as low as 5.53, with a median of 11.57.
Investors should also recognize that FSB has a P/B ratio of 0.74. The P/B ratio pits a stock's market value against 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 1.65. FSB's P/B has been as high as 1.40 and as low as 0.54, with a median of 1.08, over the past year.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. FSB has a P/S ratio of 1.55. This compares to its industry's average P/S of 1.59.
These are just a handful of the figures considered in Franklin Financial Network's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that FSB is an impressive value stock right now.