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.
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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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.
One company value investors might notice is Deutsche Telekom (DTEGY). DTEGY is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock is trading with P/E ratio of 12.04 right now. For comparison, its industry sports an average P/E of 14.48. Over the last 12 months, DTEGY's Forward P/E has been as high as 14.36 and as low as 11.48, with a median of 13.04.
Investors should also note that DTEGY holds a PEG ratio of 0.69. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DTEGY's PEG compares to its industry's average PEG of 1.17. DTEGY's PEG has been as high as 2.11 and as low as 0.66, with a median of 1.22, all within the past year.
Investors should also recognize that DTEGY has a P/B ratio of 0.91. Investors use the P/B ratio to look at a stock's market value versus 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 1.89. Over the past year, DTEGY's P/B has been as high as 1.04 and as low as 0.81, with a median of 0.94.
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. DTEGY has a P/S ratio of 0.66. This compares to its industry's average P/S of 1.47.
Telefonica (TEF) may be another strong Diversified Communication Services stock to add to your shortlist. TEF is a # 2 (Buy) stock with a Value grade of A.
Telefonica is trading at a forward earnings multiple of 8.79 at the moment, with a PEG ratio of 0.55. This compares to its industry's average P/E of 14.48 and average PEG ratio of 1.17.
TEF's price-to-earnings ratio has been as high as 19.37 and as low as 2.13, with a median of 14.09, while its PEG ratio has been as high as 1.22 and as low as 0.13, with a median of 0.88, all within the past year.
Telefonica sports a P/B ratio of 0.57 as well; this compares to its industry's price-to-book ratio of 1.89. In the past 52 weeks, TEF's P/B has been as high as 0.88, as low as 0.55, with a median of 0.76.
These are only a few of the key metrics included in Deutsche Telekom and Telefonica strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, DTEGY and TEF look like an impressive value stock at the moment.
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