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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 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 to watch right now is JD.com (JD). JD is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 9.27, which compares to its industry's average of 24.98. JD's Forward P/E has been as high as 11.39 and as low as 6.31, with a median of 8.39, all within the past year.
Investors will also notice that JD has a PEG ratio of 0.53. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. JD's PEG compares to its industry's average PEG of 1.08. Over the last 12 months, JD's PEG has been as high as 0.65 and as low as 0.16, with a median of 0.20.
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. JD has a P/S ratio of 0.41. This compares to its industry's average P/S of 1.08.
Finally, investors should note that JD has a P/CF ratio of 11.11. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. JD's P/CF compares to its industry's average P/CF of 15.25. Over the past year, JD's P/CF has been as high as 13.30 and as low as 7.05, with a median of 9.07.
Travelzoo (TZOO) may be another strong Internet - Commerce stock to add to your shortlist. TZOO is a # 1 (Strong Buy) stock with a Value grade of A.
Travelzoo also has a P/B ratio of 32.72 compared to its industry's price-to-book ratio of 5.27. Over the past year, its P/B ratio has been as high as 34.62, as low as 11.32, with a median of 16.33.