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.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One company to watch right now is Kulicke and Soffa Industries (KLIC). KLIC is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 6.70 right now. For comparison, its industry sports an average P/E of 11.55. KLIC's Forward P/E has been as high as 18.32 and as low as 5.76, with a median of 9.66, all within the past year.
Another valuation metric that we should highlight is KLIC's P/B ratio of 2.35. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. KLIC's current P/B looks attractive when compared to its industry's average P/B of 3.14. Over the past year, KLIC's P/B has been as high as 4.72 and as low as 2.03, with a median of 3.02.
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. KLIC has a P/S ratio of 1.64. This compares to its industry's average P/S of 1.65.
Finally, investors will want to recognize that KLIC has a P/CF ratio of 5.45. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 11.17. KLIC's P/CF has been as high as 17.48 and as low as 4.70, with a median of 8.07, all within the past year.
Another great Electronics - Manufacturing Machinery stock you could consider is Nikon (NINOY), which is a # 2 (Buy) stock with a Value Score of A.
Over the last 12 months, NINOY's P/E has been as high as 19.34, as low as 10.28, with a median of 13.68, and its PEG ratio has been as high as 1.81, as low as 0.22, with a median of 0.31.
Nikon also has a P/B ratio of 0.73 compared to its industry's price-to-book ratio of 3.14. Over the past year, its P/B ratio has been as high as 0.92, as low as 0.65, with a median of 0.78.
These are only a few of the key metrics included in Kulicke and Soffa Industries and Nikon strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, KLIC and NINOY look like an impressive value stock at the moment.
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