Are Investors Undervaluing Two Harbors Investments (TWO) Right Now?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 stock to keep an eye on is Two Harbors Investments (TWO). TWO is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 7.64, while its industry has an average P/E of 9.23. Over the last 12 months, TWO's Forward P/E has been as high as 10.54 and as low as 1.88, with a median of 8.

Investors should also recognize that TWO has a P/B ratio of 0.70. The P/B ratio is used to compare a stock's market value with 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 0.93. Over the past year, TWO's P/B has been as high as 1.08 and as low as 0.18, with a median of 0.92.

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. TWO has a P/S ratio of 1. This compares to its industry's average P/S of 1.63.

These are only a few of the key metrics included in Two Harbors Investments's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, TWO looks like an impressive value stock at the moment.

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