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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. 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 Centene (CNC). CNC is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 11.37, which compares to its industry’s average of 14.53. Over the past year, CNC’s Forward P/E has been as high as 18.66 and as low as 10.67, with a median of 15.93.
We also note that CNC holds a PEG ratio of 0.85. 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. CNC’s industry has an average PEG of 1.10 right now. Within the past year, CNC’s PEG has been as high as 1.27 and as low as 0.80, with a median of 1.09.
We should also highlight that CNC has a P/B ratio of 1.88. 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 3.29. CNC’s P/B has been as high as 2.96 and as low as 1.76, with a median of 2.56, over the past year.
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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CNC has a P/S ratio of 0.33. This compares to its industry’s average P/S of 0.43.
Value investors will likely look at more than just these metrics, but the above data helps show that Centene is likely undervalued currently. And when considering the strength of its earnings outlook, CNC sticks out at as one of the market’s strongest value stocks.