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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 Energy Transfer LP (ET). ET is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock holds a P/E ratio of 6.38, while its industry has an average P/E of 10.19. ET’s Forward P/E has been as high as 11.83 and as low as 4.50, with a median of 7.42, all within the past year.
Investors should also recognize that ET has a P/B ratio of 0.86. The P/B is a method of comparing a stock’s market value to its book value, which is defined as total assets minus total liabilities. ET’s current P/B looks attractive when compared to its industry’s average P/B of 1.41. ET’s P/B has been as high as 0.86 and as low as 0.44, with a median of 0.57, 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. ET has a P/S ratio of 0.66. This compares to its industry’s average P/S of 1.88.
Finally, investors will want to recognize that ET has a P/CF ratio of 4.13. This figure highlights a company’s operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock’s P/CF looks attractive against its industry’s average P/CF of 6.64. Over the past year, ET’s P/CF has been as high as 7.98 and as low as 2.92, with a median of 4.28.
Value investors will likely look at more than just these metrics, but the above data helps show that Energy Transfer LP is likely undervalued currently. And when considering the strength of its earnings outlook, ET sticks out at as one of the market’s strongest value stocks.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Read More: Should Value Investors Buy Energy Transfer LP (ET) Stock?