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Should Value Investors Buy GMS Inc. (GMS) Stock?

Zacks Equity Research

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 use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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 value investors might notice is GMS Inc. (GMS). GMS is currently sporting a Zacks Rank of #2 (Buy) and an A for Value.

We also note that GMS holds a PEG ratio of 0.63. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. GMS's industry has an average PEG of 1.62 right now. Over the past 52 weeks, GMS's PEG has been as high as 1.39 and as low as 0.46, with a median of 1.06.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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. GMS has a P/S ratio of 0.19. This compares to its industry's average P/S of 0.28.

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


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