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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the “Value” category. Stocks with high Zacks Ranks and “A” grades for Value will be some of the highest-quality value stocks on the market today.
One company value investors might notice is First American Financial (FAF). FAF is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.
Investors should also recognize that FAF has a P/B ratio of 1.22. 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 1.30. Within the past 52 weeks, FAF’s P/B has been as high as 1.54 and as low as 1.18, with a median of 1.42.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock’s price with the company’s sales. This is a prefered metric because revenue can’t really be manipulated, so sales are often a truer performance indicator. FAF has a P/S ratio of 0.74. This compares to its industry’s average P/S of 1.05.
Finally, investors will want to recognize that FAF has a P/CF ratio of 5.09. 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 company’s current P/CF looks solid when compared to its industry’s average P/CF of 6.65. Within the past 12 months, FAF’s P/CF has been as high as 6.98 and as low as 4.91, with a median of 5.82.
Universal Insurance Holdings (UVE) may be another strong Insurance – Property and Casualty stock to add to your shortlist. UVE is a # 2 (Buy) stock with a Value grade of A.
Additionally, Universal Insurance Holdings has a P/B ratio of 0.99 while its industry’s price-to-book ratio sits at 1.30. For UVE, this valuation metric has been as high as 1.41, as low as 0.82, with a median of 0.96 over the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that First American Financial and Universal Insurance Holdings are likely undervalued currently. And when considering the strength of its earnings outlook, FAF and UVE sticks out as one of the market’s strongest value stocks.
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First American Financial Corporation (FAF) : Free Stock Analysis Report
UNIVERSAL INSURANCE HOLDINGS INC (UVE) : Free Stock Analysis Report
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