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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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. 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 stock to keep an eye on is Merck KGaA (MKKGY). MKKGY is currently sporting a Zacks Rank of #2 (Buy) and an A for Value.
MKKGY is also sporting a PEG ratio of 2.13. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. MKKGY's PEG compares to its industry's average PEG of 2.25. MKKGY's PEG has been as high as 2.31 and as low as 2.07, with a median of 2.20, all within the past year.
Investors should also recognize that MKKGY has a P/B ratio of 0.63. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.38. Over the past year, MKKGY's P/B has been as high as 0.84 and as low as 0.61, with a median of 0.73.
Finally, investors will want to recognize that MKKGY has a P/CF ratio of 7.57. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. MKKGY's P/CF compares to its industry's average P/CF of 9.23. Over the past year, MKKGY's P/CF has been as high as 17.18 and as low as 7.35, with a median of 14.31.
Value investors will likely look at more than just these metrics, but the above data helps show that Merck KGaA is likely undervalued currently. And when considering the strength of its earnings outlook, MKKGY sticks out at as one of the market's strongest value stocks.
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