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Are Investors Undervaluing Grocery Outlet (GO) Right Now?

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.

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.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

Grocery Outlet (GO) is a stock many investors are watching right now. GO is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.

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Investors should also recognize that GO has a P/B ratio of 2.11. 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 3.92. Over the past 12 months, GO's P/B has been as high as 2.93 and as low as 1.95, with a median of 2.33.

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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. GO has a P/S ratio of 0.52. This compares to its industry's average P/S of 0.73.

Finally, investors will want to recognize that GO has a P/CF ratio of 15.55. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. GO's current P/CF looks attractive when compared to its industry's average P/CF of 24.22. GO's P/CF has been as high as 22.55 and as low as 14.35, with a median of 17.28, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Grocery Outlet is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, GO feels like a great value stock at the moment.

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